New York Insurance Exam Practice Question
What is the purpose of a policy loan in life insurance?
Correct Answer: B
Rationale: A policy loan allows policyholders to borrow against the cash value of their life insurance, providing immediate access to funds without the need for credit checks.
Option A is incorrect; a policy loan does not reduce the death benefit unless it remains unpaid at the time of the insured's death. Option C is misleading; while some policies may offer premium waivers under certain conditions, this is not the purpose of a loan. Option D is inaccurate as a policy loan does not cancel the policy; it remains active as long as premiums are paid and the loan is managed properly.
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