Discuss Finra Series-6 Exam Topic 7 Question 11

Ken has a variable life policy and recently learned that he can borrow against its cash value to help pay for some of the expenses he's incurring while pursuing a graduate degree.

Which of the following statements about the loan he can get is true?

AKen can borrow at most only 50% of the cash value, and only as long as he's had the policy for at least three years.

BSince Ken is essentially borrowing his own money; the loan is interest-free.

CKen never has to repay the loan, but if he chooses not to do so, his wife, Barbie, won't get as much when he dies.

DKen has been misinformed. He cannot borrow against the cash value of a variable life policy because the cash values of these policies fluctuate constantly.

Suggested Answer: C

The true statement is that Ken never has to repay the loan, but if he chooses not to do so, his wife, Barbie, won't get as much when he dies. He can borrow up to at least 75% of the cash value, but there is interest charged on the loan. (In essence, he's paying interest to himself, though.)

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11 comments · newest first

Stefania 1 year ago

If he doesn't repay, Barbie's payout will be affected. That's a big deal!

Frederica 1 year ago

Actually, he can borrow more than 50% depending on the policy terms.

Leonida 1 year ago

Wait, he doesn't have to repay it? That sounds too good to be true.

Serita 1 year ago

I thought the loan would be interest-free since it's his own money?

Dan 1 year ago

You can definitely borrow against the cash value of a variable life policy.

Alline 1 year ago

I’m pretty certain that you can borrow against the cash value of a variable life policy, so D doesn’t sound right. But I can’t recall the exact borrowing limits.

Ronny 1 year ago

I think I saw a question like this before, and it mentioned that loans against cash value do accrue interest, so option B seems wrong to me.

Maryann 1 year ago

I remember something about how much you can borrow from a variable life policy, but I’m not sure if it’s a strict percentage or if it depends on the policy duration.

Renay 1 year ago

I feel like I read that you don’t have to repay the loan, but it affects the death benefit. So, C might be the right answer, but I’m not completely sure.

Dell 1 year ago

I'm pretty sure the valid example for the ---source attribute is URI://mydir/test.pdf, since that's a valid URI format.

Gracia 1 year ago

This question seems straightforward, but I want to make sure I understand the details correctly.

Finra Series-6 Exam - Topic 7 Question 11 Discussion