LLQP (Life Licence Qualification Program) Practice Exam · Question
What is the primary risk of using the cash value of a universal life policy to fund a 'premium holiday'?
While taking a premium holiday is a feature of Universal Life, the monthly cost of insurance and any administration fees are still deducted from the policy fund
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Question: What is the primary risk of using the cash value of a universal life policy to fund a 'premium holiday'?
Answer options:
- It will immediately trigger a taxable disposition.
- The death benefit will be permanently reduced. ✅ The policy could lapse if the cash value is depleted and can no longer cover the monthly cost of insurance.
- It can only be done during the first two years of the policy.
Correct answer: The policy could lapse if the cash value is depleted and can no longer cover the monthly cost of insurance.
Explanation: While taking a premium holiday is a feature of Universal Life, the monthly cost of insurance and any administration fees are still deducted from the policy fund. If the fund is exhausted, the policy will lapse and coverage will terminate.
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- A life insurance policy that offers lifelong coverage, a guaranteed death benefit, and a savings component tha
- Group benefits in Canada commonly include:
- Sarah, a 35-year-old marketing professional in Ontario, purchases a participating whole life insurance policy
- Mark, a 45-year-old business owner in British Columbia, has a Universal Life policy with a Level Cost of Insur
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