Tennessee Insurance Practice Exam 2025 – All-in-One Resource for Exam Success!

In a life insurance policy with a rear-end loaded provision, surrender charges are specifically deducted when the policy is discontinued. This type of provision often means that the initial premiums appear lower because the costs associated with the policy are not fully realized until the policyholder decides to surrender the policy or terminate it.

When a policyholder chooses to discontinue the policy, surrender charges come into play to recover costs incurred by the insurer for issuing the policy. This ensures that the insurance company can recoup some of its expenses related to the policy before returning any remaining cash value to the policyholder.

Other options do not reflect the mechanism of surrender charges in this type of policy. For instance, charges are not deducted at the time of purchase, during policy renewals, or directly related to premium payments. Instead, they only affect the policyholder's account balance upon policy termination. Understanding this aspect is crucial for evaluating the long-term costs associated with life insurance policies that feature rear-end loaded provisions.