What “guarantees” means. When we say a benefit is guaranteed, we mean it is backed by the contractual promises of the issuing life insurance company — not by market performance. Guarantees are subject to the claims-paying ability of the insurer.
How policy loans affect the death benefit. Outstanding policy loans and loan interest reduce the cash value and, if unpaid at death, reduce the death benefit payable to your beneficiaries.
What “tax-preferred” means. Cash value grows tax-deferred; policy loans generally do not trigger current income tax; and a death benefit is generally income-tax-free to an individual beneficiary. These advantages hold only while the policy remains in force and is not a Modified Endowment Contract (MEC). This is not tax advice; consult a qualified tax professional.
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