Policy Loans

If a policy loan or the interest on a policy loan is not paid, this amount is added to the indebtedness on the policy. If the policy loan and the interest become greater than the total cash value of the policy, the policy will A. Be reduced B. Increase C. Lapse D. Continue as before

C. Lapse

An insured requests a loan from her life insurance policy to pay a premium that is due. The insurer may delay that request for how many months? A. 0 B. 2 C. 6 D. 12

A. 0

To prevent the loss of investment income for the insurer, policyowners receiving a loan from the cash value of a policy are charged a A. Set price B. Rate of interest C. Premium D. Loan fee

B. Rate of interest

Ed takes out a loan on his life insurance policy. He is killed in a car accident shortly thereafter, so the debt is left unpaid. Which of the following will happen? A. An amount equal to the loan, plus interest due and a penalty will be deducted from the death benefit B. The insurance company will absorb the amount of the loan, and the State will cover the cost of interest C. An amount equal to the loan, plus interest due will be deducted from the death benefit D. The state will cover the costs of the loan, plus interest

C. An amount equal to the loan, plus interest due will be deducted from the death benefit

When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value? A. Mortality costs B. The cash surrender amount C. Outstanding loans and interest D. The face amount

C. Outstanding loans and interest

Which of the following components must a life insurance policy have to allow policy loans? A. Dividends B. Flexible premiums C. Face amount D. Cash value

D. Cash value

If the irrevocable beneficiary of a life insurance policy becomes legally incompetent and cannot perform any legal act, the policyowner could obtain a loan for the benefit of A. The insurance company B. The doctor C. The policyowner D. The beneficiary

D. The beneficiary

Interest rates on policy loans are classified as A. Reduced or increased B. Fixed or variable C. Steady or changing D. Good or poor

B. Fixed or variable

An insurer may delay or defer a request for a policy for up to A. 24 months B. 3 months C. 6 months D. 12 months

C. 6 months

For how long s an insurance company allowed to defer policy loan requests? A. 30 days B. 60 days C. 6 months D. 1 year

C. 6 months

When would unpaid interest be added to a policy loan balance? A. Unpaid interest is not added to the loan balance B. On the policy anniversary date C. On January 1st D. On the policy owners birthday

B. On the policy anniversary date

Harry is the owner of a $150,000 whole life policy with a cash value of $55,000. During the 40 years that Harry has owned this policy, he has paid a total of $43,200 in premiums. Harry, now age 64, borrowed $40,000 from the cash value to take his wife on an Alaskan cruise. The excitement was just too much for Harry, and he died during the cruise. How much will his wife, the named beneficiary, receive as a death benefit from this policy? A. The cash value ($55,000) minus the outstanding loan amount of $40,000 plus any interest that has accrued B. The death benefit ($150,000) minus the outstanding loan amount of $40,000 plus any interest that has accrued C. Nothing, the insured died before the loan was repaid D. The full face value ($150,000) of the policy since the loan was taken from the cash value of the policy

B. The death benefit ($150,000) minus the outstanding loan amount of $40,000 plus any interest that has accrued

When must a life insurance policy loan be repaid? A. By the time the next premium payment is due B. The time is not specified so long as the total indebtedness does not exceed the policy cash value C. 30 days after the insurer demands repayment D. At the time specified in the loan request

B. The time is not specified so long as the total indebtedness does not exceed the policy cash value

If the insureds death occurs while a loan is outstanding, which of the following will occur? A. The state will cover the costs of the loan, plus interest B. An amount equal to the loan, plus interest due will be deducted from the death benefit C. An amount equal to the loan, plus interest due and a penalty will be deducted from the death benefit D. The insurance company will absorb the amount of the loan, and the State will cover the costs of the interest

B. An amount equal to the loan, plus interest due will be deducted from the death benefit

Joe named his wife Donna as the irrevocable beneficiary of his life insurance policy. He now wants to take out a loan on the policy. Who must Joe get consent from to take out this loan? A. His neighbor B. Donna, the irrevocable beneficiary C. Donna's parents D. His parents

B. Donna, the irrevocable beneficiary

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? A. The insurer will not permit the policyowner to take out any more loans B. The policy will be reduced to an extended term option C. The policy will terminate when the loan amount with interest equals or exceeds the cash value D. The insurer will increase the interest rate on the loan and charge a penalty

C. The policy will terminate when the loan amount with interest equals or exceeds the cash value