Massachusetts Life Producer Practice Exam

How long do most states allow insurers to delay cash surrender payments?

1. 3 months

2. 6 months

3. 9 months

4. 12 months

The correct answer is: 6 months

In most states, insurers are permitted to delay cash surrender payments for a maximum of six months. This time frame is intended to protect insurers from potential losses and allows them to manage their cash flow in an orderly manner, as surrendering policies can impact their financial stability. The six-month delay serves a practical purpose; it allows the insurer to complete any necessary administrative processes, verify the policy's status, and ensure that all requirements for the surrender are met. Additionally, this period helps to prevent cases where an individual might surrender a policy simply for immediate cash without fully understanding the long-term consequences of such an action. While some states may have different regulations or laws regarding surrender delays, the six-month period is widely recognized and implemented across many jurisdictions, making it a standard in the industry that policyholders should be aware of when considering surrendering their life insurance policies.