Question

A Whole life or Continuous Premium Whole life insurance policy includes a loan provision. Which of the following statements in INCORRECT?

A. Loans do not need to be repaid.
B. At death, outstanding loans plus interest are subtracted from the death benefit.
C. Only fixed interest rates can be charged against the loan.
D. Loans may be delayed by the insurer for up to 6 months.

Answer 1

A Whole life or Continuous Premium Whole life insurance policy includes a loan provision. The statement that is INCORRECT is A. Loans do not need to be repaid.

Step-by-step explanation:

A Whole life or Continuous Premium Whole life insurance policy includes a loan provision. The statement that is INCORRECT is A. Loans do not need to be repaid. In reality, loans taken against a whole life insurance policy must be repaid, along with interest. This is because the loan is borrowed from the cash value that has been accumulated in the policy. The outstanding loans plus interest are subtracted from the death benefit when the insured individual dies.

Therefore, option A is incorrect because loans do need to be repaid and are not forgiven.