If the total amount of an unpaid policy loan, plus accrued interest, exceeds the total cash value of the life insurance policy, the policy may terminate. This is because the insurer can only loan a portion of the cash value, and if the loan balance exceeds it, the policy will be in danger of lapsing.
[Reference: Virginia Life, Annuities, and Health Insurance Code, Section 38.2-3415 (Policy Loans and Cash Value), , , ]
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