What is the term for a provision that allows a policyowner to withdraw a policy's cash value interest free?

A provision that allows a policyowner to withdraw a policy's cash value interest-free is classified as a partial surrender. This feature permits the policyowner to access a portion of the accumulated cash value of a permanent life insurance policy without incurring interest charges or penalties that would typically be associated with taking out a loan against the policy.

In the context of life insurance policies, partial surrenders are particularly advantageous as they enable policyholders to obtain liquidity while maintaining their insurance coverage. By opting for a partial surrender, the policyholder reduces the total cash value of the policy, which may affect the death benefit and the future growth of cash value, but does not require repayment like a loan would.

The other options provided refer to different concepts. A cash withdrawal generally implies taking cash out of the policy, but it often relates to situations where interest may apply. The loan provision permits the policyowner to borrow against the policy's cash value, but this incurs interest and must be repaid. A cash value policy is simply a type of insurance that builds cash value but does not describe the specific action of withdrawing funds. Thus, partial surrender accurately describes the action of accessing the cash value without additional costs or repayment requirements.