Which of the Following Statements Is True Regarding an Automatic

question 36

Multiple Choice

Which of the following statements is true regarding an automatic premium loan provision?

• A)Its purpose is to prevent a policy from lapsing because of nonpayment of premium.
• B)Interest does not have to be paid on an automatic premium loan.
• C)If the provision is used,the insured must show evidence of insurability to resume regular premium payments.
• D)An automatic premium loan,unlike a regular policy loan,is forgiven if the insured dies before the loan is repaid.

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Definitions:

Variable Costing

An accounting method that includes only variable production costs in the cost of goods sold and treats fixed overhead expenses as period costs.

Operating Income

Earnings from a company’s core business operations, excluding deductions of interest and taxes.

Absorption Costing

An accounting method that includes all direct costs and overheads involved in manufacturing a product in the cost of that product.

Contribution Margin

The amount of revenue remaining after subtracting the variable costs associated with producing goods, contributing to covering fixed costs and profit.