State RegulationsAZ specificDifficulty 3/5
An Arizona policyowner with an unpaid premium due requests a policy loan from her policy's cash value. Under A.R.S. 20-1208 and A.R.S. 20-1209, for which request may the insurer NOT exercise its right to defer payment for up to six months?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under A.R.S. 20-1208 and A.R.S. 20-1209, an Arizona insurer may defer payment of a cash loan for up to six months after due request, but the deferment right does not extend to a loan needed to pay a premium currently due on the policy. The law protects the policy from lapsing merely because the insurer delayed a loan intended to keep coverage in force.
Why the other options are wrong
- B) A general cash loan is precisely the type the insurer may defer for up to six months under A.R.S. 20-1208.
- C) A loan for business expenses is an ordinary cash loan subject to the six-month deferment right.
- D) A loan payable to a third party at the owner's direction is still a cash loan and may be deferred under A.R.S. 20-1208.
Memory hook
Premium-pay loans jump the queue — only those escape the six-month deferral.