Life Term, Whole Life & Term to 100 question: Mehdi's whole life policy

LifeTerm, Whole Life & Term to 100

Mehdi's whole life policy has an automatic premium loan provision. He missed his $2,400 annual premium on two consecutive due dates, and each was paid by an automatic premium loan. Loan interest is 6% a year, compounded annually and added to the loan. Two years after the first missed premium, how much does he owe?

A $4,800.00
B $5,088.00
C $5,240.64
D $5,393.28

Show the answer and explanation

Answer: C. $5,240.64

The first loan has run two years: $2,400 × 1.06² = $2,696.64. The second has run one year: $2,400 × 1.06 = $2,544.00. Total owed $5,240.64. $5,393.28 charges two years of interest on both loans, $5,088.00 charges one year on both, and $4,800.00 ignores interest. The automatic loan keeps the policy in force only while the cash value can support the growing debt, and the debt reduces both the cash value and the death benefit. Source: Insurance Act (BC), RSBC 2012, c. 1, s. 42(2)(f)(ii) (loan or advance payment option) (current to 6 Oct 2026); CISRO LLQP Curriculum (May 2015; current as at 12 Oct 2026), Life component 2.1 (non-forfeiture benefits: automatic premium loans); arithmetic on stated terms (as at 12 Oct 2026).

Common mistake

Charging every loan for the same number of years.

Practice more Life Term, Whole Life & Term to 100 questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practicing →

Study note: Term, Whole Life & Term to 100 Lifepractice questions & mock exams

Related Life practice questions

Rachel, 32, needs $500,000 of coverage for 20 years. A 10-year renewable term costs $40 a month now and, under its guaranteed renewal schedule, $115 a month for the second 10 years. A 20-year level term costs $62 a month. If she keeps either policy for the full 20 years, how much more will the 10-year term cost in total?Tobias, 67, owned a $250,000 participating whole life policy with a cash surrender value of $48,000. He had taken a $20,000 policy loan, and $1,200 of loan interest had accrued and was unpaid when he died. His daughter is the named beneficiary. Ignoring dividends, how much does his named beneficiary receive?Farid, 39, earns $70,000 a year and has group life equal to twice his salary, plus $60,000 of non-registered savings. If he dies, his wife Leila, who nets $30,000 a year, needs $48,000 a year after tax for the family. Other needs: final expenses $25,000, mortgage $310,000, other debts $18,000 and an education fund of $80,000. Capital earns 4% and only the income is spent. How much additional coverage does Farid need?

Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.

Start practicing →

Original study material mapped to the public CISRO curriculum; not a real test question.Not affiliated with CISRO, CCIR or any provincial insurance regulator. Verify figures and rules against current guidance before relying on them.