Life policies can be used as collateral for a loan when the policy has?

A. ceased to be life
B. been temporarily suspended
C. acquired a surrender value
D. has been made paid-up

Correct Answer: Option C

Explanation

A collateral assignment of life insurance is a conditional assignment appointing a lender as the primary beneficiary of a death benefit to use as collateral for a loan. If the borrower is unable to pay, the lender can cash in the life insurance policy and recover what is owed.

‘Surrender Value’: It is the amount the policyholder will get from the life insurance company if he decides to exit the policy before maturity.