What does "forwarding of premiums" in a life insurance context refer to?

In the context of life insurance, "forwarding of premiums" typically refers to the practice of deferring payments by borrowing against the policy's cash value. This means that if a policyholder does not have the funds to pay their premium, they can take a loan against the cash value that has been accumulated in their life insurance policy. This option allows the policyholder to keep the coverage active without needing to make an immediate cash payment.

When a policyholder borrows against their cash value, it essentially provides financial flexibility and allows them to manage their cash flow better, especially in times of financial strain. However, it’s important to note that any unpaid loan plus interest will be deducted from the death benefit if the policyholder passes away before repaying the loan.

The other options focus on different aspects of life insurance, such as premium refunds or automatic extensions, which are unrelated to the concept of forwarding premiums through loans. By understanding the process of borrowing against cash value, individuals can make informed decisions on how to manage their life insurance premiums effectively.