Some plans show very quick premium vanishes based on borrowing the required premium from the cash values. These illustrations assume that dividends will be sufficient to pay interest on the loans. If dividends are lower than projected, the policyowner will have to pay more into the policy than projected to pay interest or borrow more each year to cover the shortage. Because loans are netted against the death benefit, this could lead to substantially lower net death benefits than projected.
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Reproduced with permission. Copyright The National Underwriter Co. Division of ALM