Arkansas Life and Health Insurance Practice Exam

Failure to repay a loan or loan interest will void a life insurance policy:

1. If the total amount due exceeds the policy's death benefit

2. If the total amount due equals or exceeds the policy's cash values

3. If the total amount due is below the policy's cash values

4. If the total amount due is less than the premiums paid

The correct answer is: If the total amount due exceeds the policy's death benefit

Failure to repay a loan or loan interest can void a life insurance policy when the total amount due exceeds the policy's death benefit. In this scenario, the outstanding loan amount is higher than the amount that would be paid out upon the insured's death, thus jeopardizing the insurer's ability to fulfill the policy obligations. Therefore, it is important to monitor loan repayments to prevent the policy from being voided due to financial discrepancies. Options B, C, and D are not correct because they do not accurately reflect the conditions under which failure to repay a loan or loan interest would void a life insurance policy.