AD Banker Comprehensive Practice Exam

An insurer may reserve the right to defer the payment of a cash surrender value for up to _________ months after demand is made and the policy is surrendered.

1. 6 months

2. 2 months

3. 1 month

4. 3 months

The correct answer is: 6 months

The correct answer is that an insurer may reserve the right to defer the payment of a cash surrender value for up to 6 months after the demand is made and the policy is surrendered. This provision is designed to protect insurers from sudden cash outflows, providing them with time to manage their liabilities effectively. Generally, insurance policies allow for a cash surrender value, which is the amount an insurer pays to the policyholder if they decide to terminate the policy before its maturity. The ability to defer payment up to 6 months is a common industry standard, ensuring that insurers have sufficient time to process the surrender and manage necessary funds accordingly. This period reflects the need for operational efficiency while still protecting policyholder interests. The other options reflect shorter timeframes, which do not align with typical regulatory provisions and industry practices concerning cash surrender values. Each of those shorter durations would not provide the insurer adequate time to handle administrative and funding challenges that may arise upon cessation of the policy.