Which of the following is true about administrative charges on an FPDA?
A) A front-end load is also called a surrender charge.
B) A front-end load is charged on each premium payment.
C) A front-end load is always higher than the back-end load.
D) By law an insurer can only charge a front-end load or a back-end load, but not both.

Question

Quizplus · Accepted Answer

A front-end load is a charge that is deducted from the premium payment before it is invested in the policy. This charge is usually a percentage of the premium payment and is meant to cover the initial administrative expenses of setting up the policy. Therefore, option B is correct as it states that a front-end load is charged on each premium payment.

Option A is incorrect because a surrender charge is a fee that is levied on the policyholder if they surrender their policy before a certain period, which is usually stated in the policy contract.

Option C is incorrect because the front-end load and back-end load can have different prevailing rates depending on the policy and the insurer in question.

Option D is incorrect because an insurer can choose to charge both a front-end load and a back-end load if stated in the policy contract as long as it does not exceed the allowed limit.

Which of the Following Is True About Administrative Charges on an FPDA