6.6, 6.7 dividends and nonforfeiture

Which of the following is NOT a standard life insurance policy nonforfeiture option?

1 year term insurance option

What is the default nonforfeiture option?

Extended term

Leland elects to surrender his whole life policy for a reduced paid up policy. The cash value of his new policy will

continue to increase

Lynn elects to surrender her whole life policy for a reduced paid-up policy. The cash value of her new policy will:

continue to increase

John, age 55, owns a whole life policy with a face amount of $100,000 for which the annual premium is $1,000. John explains to his agent that he lost his job and cannot afford his $1,000 annual premium but still desires to have life insurance to age 100. What nonforfeiture option could John's agent recommend to him?

reduced paid up policy

Tammy owns a participating whole life insurance policy for which she has elected the paid-up additions option. If the insurer declares a dividend of $500 in the current year, how will this amount be used with this dividend option?

the insured uses the $500 as if it were a single premium purchase a unit of paid-up whole life insurance based on Tammy's attained age

Which of the following statements regarding the paid up additions life insurance policy dividend option is NOT correct?

the paid up additions dividend option is only available to insureds that remain insurable

A policyowner stops paying premiums on a whole life policy with an accidental death benefit and exchanges the policy for extended term insurance. Which of the following statements pertaining to this situation is NOT correct?

the term policy will have a reduced face value

Most participating whole life insurance policies allow all of the following uses of standard life insurance dividends EXCEPT

to increase the policy's face amount

Wendy has a $100,000 whole life participating policy. She recently married and is planning to have a family. She wants to increase her life insurance coverage but at minimal additional cost. Which of the following dividend options would be most suitable for her needs?

use dividends to buy paid up additions

With a participating life insurance policy, a policyowner may do all of the following with dividends received EXCEPT

use the dividends to pay overdue premiums from previous years

Arnold buys a $25,000 participating whole life policy. He has a definite need for more life insurance, but believes he cannot afford it. Which of the following dividend options would help to solve this problem automatically?

using dividends to buy paid up additions

All of the following are standard life insurance dividend options EXCEPT

using the dividend to increase the base whole life policy's face amount

Denise, age 52, has a straight whole life policy and decides to stop paying premiums and take a paid-up policy for a reduced amount. Her paid-up policy will be

whole life

At age 60, David decides to stop paying premiums on his $60,000 whole life policy and exchanges it for extended term insurance. What face value will the term insurance have?

$60,000

The privilege of accessing the cash value of an insurance policy if it is surrendered is known as the

nonforfeiture provision

Insurance policies that pay dividends are referred to as

participating policies

Which of the following statements about participating and nonparticipating life insurance policies is NOT correct?

Policy dividends are considered taxable income

Which of the following statements regarding policy dividends is CORRECT?

They are the difference between the gross premium charged and the actual experience of the insurer

Unlike corporate dividends, insurance policy dividends:

are not considered taxable income

All of the following are dividend options EXCEPT

assigning dividends to pay off a mortgage

Which of the following dividend options produces a result similar to taking dividends in cash and depositing them in a bank savings account?

leaving dividends to accumulate at interest

In the sale of life insurance, all references to policy dividends:

must include a statement that dividends are not guaranteed