What is policy loan in SAP FS-CML - Loans Management?

SAP Term: policy loan

• Component: FS-CML

• Component Name: Loans Management

• Description: An advance payment on the insurance benefit of a life insurance policy. The maximum amount is based on the repurchase value of the policy. The advance payment is made as a loan on which interest is paid; the interest rate is aligned with the current capital market conditions for loans secured by collateral.

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• Key Concepts: 
  A policy loan is a type of loan that is taken out against the cash value of a life insurance policy. It allows the policyholder to borrow money from the insurer, using the cash value of the policy as collateral. The loan is typically repaid with interest, and any unpaid balance will be deducted from the death benefit when the policyholder passes away. 
  
  How to use it: 
  The FS-CML Loans Management component of SAP allows users to manage policy loans. This includes setting up loan accounts, tracking payments, and calculating interest. It also provides features for managing loan defaults and delinquencies. 
  
  Tips & Tricks: 
  When taking out a policy loan, it is important to consider the impact it will have on your death benefit. The unpaid balance of the loan will be deducted from the death benefit when you pass away, so it is important to make sure that you can afford to repay the loan in full before taking it out. 
  
  Related Information: 
  For more information about policy loans and how to manage them in SAP, please refer to the FS-CML Loans Management documentation.