Utah Life Insurance Practice Test

The feature that allows a policyholder to take a loan against their life insurance policy is the cash value of the policy. This applies specifically to permanent life insurance policies, such as whole life or universal life insurance, which build cash value over time. As the policyholder pays premiums, a portion of those premiums contributes to the cash value component, which accumulates interest.

When the need arises, the policyholder can borrow against this accumulated cash value. The loan amount is not subject to credit checks or approval processes, making it a flexible source of funds. However, it’s important to note that any outstanding loans will reduce the death benefit payable to beneficiaries if not repaid during the policyholder's lifetime.

In contrast, the other options do not provide the ability to borrow against the policy. The death benefit is the amount paid to beneficiaries upon the policyholder's passing and cannot be borrowed against directly. Premium payments are the amounts paid to keep the policy active and do not accumulate in a way that allows for borrowing. The policy's term length pertains to temporary policies, like term life insurance, which do not build cash value and hence do not allow for loans.