What is the purpose of the policy loan feature in a VUL policy?

The policy loan feature in a Variable Universal Life (VUL) policy primarily serves to allow the policyholder to borrow against the cash value accumulated within the policy. This feature offers flexibility and accessibility to the policyholder, enabling them to tap into the funds they have accumulated without needing to surrender or terminate the policy.

When a policyholder utilizes this feature, they can access cash for various purposes, such as emergencies, education expenses, or retirement funding, while still maintaining the life insurance coverage associated with the policy. While interest is usually charged on the amounts borrowed, the loan does not require repayment during the policyholder's lifetime; however, any unpaid loan balance may impact the death benefit payable to beneficiaries.

This characteristic of borrowing against cash value does not inherently enhance the death benefit, increase premium payments, or automatically invest the cash value into stock markets, which are functions outside the scope of the loan feature. Thus, the option that accurately captures the purpose of the policy loan feature is focused on the ability to take loans against the cash value.