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Other than RPU, that is exactly what will happen.
RPU keeps the policy "intact" and avoids any taxation issues on the Loans. It is what overloan protection riders do, it RPUs the policy.
But I doubt they are able to RPU a policy with such a tiny CV. You need equity in the policy to RPU outside of an Overloan Rider.
Agree, but this must have a positive CV of a small amount. RPU can be an absolute tiny amount. Have seen policies in first few years even go RPU for a $1,000 face amount. However, I am not so sure going RPU carries the loan forward with some carriers. It should, but I would want that confirmed by the carrier to make sure they are not going to treat it like a 1035 exchange. I know that most carriers use both the base CV & the PUAR to purchase the RPU, thus losing the more liquid RPU. But need to make sure they dont also fully extinguish the loan with PUAR & base cash value.