What is the function of a cash loan in life insurance?

A cash loan in life insurance allows the policyholder to borrow against the cash value that has accumulated in a permanent life insurance policy, such as whole life or universal life insurance. This feature enables the policyholder to access funds for personal needs while still retaining the insurance coverage. The money borrowed does not need to be repaid immediately, and interest is charged, which can affect the policy's death benefit if the loan remains unpaid at the time of the policyholder’s death.

The key aspect of this function is that it provides financial flexibility to policyholders, allowing them to leverage their investment in the policy without having to surrender it. This means they can use the borrowed funds for various expenses—like education, home purchases, or emergencies—without losing the insurance protection they have.

Other options do not accurately reflect the purpose of a cash loan. Drawing funds from the primary insurer does not specify using accumulated cash value, making it less precise. Making immediate claims on policies typically refers to the benefit paid out to beneficiaries and does not relate to loans. Lastly, settling all policy premiums is unrelated to the cash loan function, as premiums are payments for insurance coverage rather than funds accessed by the policyholder.