Which of the Following Statements About Life Insurance Policy Loans

question 12

Multiple Choice

Which of the following statements about life insurance policy loans is true?

• A)Loans are only permitted for specific reasons listed in the policy.
• B)They are forgiven if the insured dies before the loans are repaid.
• C)The policyholder must pay interest on a life insurance policy loan.
• D)They must be repaid on the basis of a schedule determined at the time of the loan.

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Definitions:

Collection Float

The time period between when a check is deposited and when the funds become available in the recipient's account, affecting the cash flow and liquidity.

Float Management

The practice of managing the time between when a check is deposited and when it clears, to optimize the use of funds.

Target Cash Balance

The optimal amount of cash a company seeks to maintain to handle operational and transactional needs efficiently.

Carrying Costs

Expenses associated with holding inventory, including storage costs, insurance, and loss due to obsolescence.