Policy Loan 保單抵押貸款

Nature of a Policy Loan 保單抵押貸款的性質

A policy loan is money the policyholder borrows from the insurer under the policy terms, with the policy's cash value as security. In effect the insurer is advancing money it would later have to pay under the policy, so it does not need a credit check, does not normally ask how the money will be used, and does not ask for new evidence of the life insured's health.

The right to apply belongs to the policyholder, not the life insured or the beneficiary. If the policy has been assigned, the right passes to the assignee. If there is an irrevocable beneficiary, that beneficiary's consent may be needed first, depending on the policy terms and the legal interests involved.

Eligibility and Loan Limit 申請資格及貸款限額

Only a policy that has built up a cash value can support a loan, such as a whole life or endowment policy. Term insurance normally has no cash value, so it generally carries no such right. Even a whole life or endowment policy may not have enough cash value to borrow against in its early years.

The maximum is set by the policy terms. It is usually a stated percentage of the cash value, less any existing loan and accrued interest. Leaving a margin means the cash value can absorb interest that builds up later.

Interest, Repayment and Effect on the Policy 利息、還款及對保單的影響

Interest is charged at the rate stated in the policy or set by the insurer under its terms. The policyholder may repay all or part of the loan at any time, but there is no fixed repayment date, and the insurer cannot pursue the debt as an ordinary creditor would. Unpaid interest is normally added to the loan, so the debt gradually grows.

The policy stays in force during the loan, and premiums must still be paid when due. If a balance remains at death, maturity or surrender, the insurer first deducts the loan and interest from the amount payable. For example, with a death benefit of HK$1,000,000 and a debt of HK$120,000, the amount paid is HK$880,000. Repaying the loan restores the amount payable accordingly.

If the loan and interest grow beyond the cash value, the insurer may terminate the policy under its terms after giving notice, unless the policyholder repays enough within the time allowed. The policyholder generally has no personal liability for the shortfall, but loses the cover.

How It Differs from Related Arrangements 與相關安排的分別

Surrender: the policy ends and the policyholder receives the surrender value. A policy loan provides funds while keeping the policy in force, although the debt reduces later benefits.

Automatic premium loan: this usually operates when a premium is still unpaid after the grace period. The insurer advances the premium from the cash value to prevent a lapse, and the money is used only for premiums. An ordinary policy loan is requested by the policyholder and can be used for any purpose. Both carry interest, and both are deducted from benefits if unpaid.

Assignment to a bank as security: the lender is the bank, the borrowing terms are agreed with the bank, and the policy rights pass to the bank as security, with notice given to the insurer. Under a policy loan the lender is the insurer itself, and no assignment is needed.