AD Banker Comprehensive Practice Exam

If a policyowner has a $100,000 policy with an accumulated cash value of $6,000, up to how much can they borrow?

1. The entire accumulated cash value of $6,000, less interest for 1 year

2. Never more than the full face amount of the policy

3. The total amount of premiums paid into the policy

4. 50% of the accumulated cash value

The correct answer is: The entire accumulated cash value of $6,000, less interest for 1 year

The correct answer is that the policyowner can borrow the entire accumulated cash value of $6,000, less any interest that has accrued for one year. When a policy has a cash value, the policyowner typically has the right to borrow against this value. The amount available for borrowing is generally equal to the accumulated cash value, as this is considered collateral for the loan. In this case, the accumulated cash value is $6,000, and the policyholder can borrow that amount, but the loan will accrue interest. Therefore, the actual amount available for borrowing would be the cash value minus any interest that may have accrued on the loan. The other options are not valid in this context. Limits based on the face amount of the policy or total premiums paid do not apply when determining the loan amount against the cash value. Additionally, the idea of borrowing a fixed percentage of the cash value does not align with standard policy provisions concerning cash value loans.