New Jersey Life Insurance Exam Practice Question
An insured has a policy with a stated cash value of $1500 and the insured still owes $500 of a previous loan from this cash value. How much money will the insurer give the insured for the cash surrender value option?
Correct Answer: B
Rationale: When determining the cash surrender value, the insurer subtracts any outstanding loans from the stated cash value. In this case, the policy has a cash value of $1,500, and the insured owes $500. Therefore, the calculation is $1,500 - $500, resulting in a cash surrender value of $1,000.
Option A, $500, is incorrect as it represents only the outstanding loan amount, not the remaining cash value. Option C, $1,500, overlooks the loan repayment requirement. Option D, $2,000, is incorrect as it exceeds the stated cash value of the policy. Thus, the accurate cash surrender value is $1,000.
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