LLQP (Life Licence Qualification Program) Practice Exam · Question
What is the primary difference between a 'Policy Loan' and a 'Collateral Loan'?
A 'Collateral Loan' is a loanfrom a third-party (like a bank) using the policy as collateral. A 'Policy Loan' is a loan directly from the insurer against the ca
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Question: What is the primary difference between a 'Policy Loan' and a 'Collateral Loan'?
Answer options:
- A policy loan is always tax-free; a collateral loan is always taxable. ✅ A policy loan is from the insurer; a collateral loan is typically from a third-party lender.
- A policy loan requires medical evidence; a collateral loan does not.
- There is no difference; the terms are interchangeable.
Correct answer: A policy loan is from the insurer; a collateral loan is typically from a third-party lender.
Explanation: A 'Collateral Loan' is a loanfrom a third-party (like a bank) using the policy as collateral. A 'Policy Loan' is a loan directly from the insurer against the cash value. Both differ from a 'Partial Surrender' where the face value is reduced.
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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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