AD Banker Comprehensive Practice Exam

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Enhance your exam readiness with the AD Banker Comprehensive Exam guide. Includes flashcards and multiple-choice questions with explanations.

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Which statement about policy loans is incorrect?

  1. A policy loan cannot be made on a policy until it has been in force long enough to accumulate some cash value

  2. If a policy has cash value, the insurance company cannot refuse to lend the policyowner money

  3. The loan value of a policy cannot exceed the current cash value

  4. Policy loans may be made on any type of policy

The correct answer is: Policy loans may be made on any type of policy

The statement that policy loans may be made on any type of policy is incorrect because not all types of insurance policies actually allow for policy loans. Typically, only permanent life insurance policies, such as whole life and universal life, have a cash value that can be borrowed against. In contrast, term insurance policies do not accumulate cash value and therefore do not offer the option for policy loans. This distinction is crucial in understanding how policy loans work and which policies provide this feature. For a policy loan to be available, the policy must have a cash accumulation component, which excludes term policies and makes this statement inaccurate.

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