Chapter 5 Options

Which life insurance dividend option does not increase a policy's cash value?

Cash payment

Which of the following is a guarantee that is required by law to be a part of life insurance polices that build cash value?

Nonforfeiture option

The automatic dividend option is:

Paid-up additions

Which of the following nonforfeiture options does not allow the insured to reinstate the policy:

Which of the following nonforfeiture options does not allow the insured to reinstate the policy:

All of the following are nonforfeiture options, EXCEPT:

Accumulate at interest

Which of the following provisions allows a life insurance policy to continue beyond the grace period when a premium is overdue and not paid?

Nonforfeiture option

Eddie wants to use a nonforfeiture option. Which of the following may Eddie not use?

Accumulation at interest

This dividend option provides additional permanent coverage:

Paid-up additions

Some policies offer the policyholder the opportunity to purchase additional insurance when they get married, or have children. What is the factor that determines the rate of the additional coverage?

The attained age of the insured when the additional insurance is purchased

Extended term is another option of the nonforfeiture provision. If Clarice opts to no longer pay the premiums on her $100,000 whole life policy and exchanges it for an extended term policy, what will be the face value of the term insurance policy

$100,000

What nonforfeiture option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the policy's existing cash value?

Reduced paid-up insurance

Which of the following is not a dividend option?

Reduced paid-up insurance

Life insurance policies that pay dividends are referred to as "participating policies". Participating policies pay dividends to policyholders. Which of the following is a true statement about dividends?

Dividends are not taxable, Dividends are usually paid on an annual basis. & Dividends are actually a return of overcharged premiums

When the extended term option is used, the face amount is:

Equal to the original coverage

Rick is planning on getting married next month. He currently has a $100,000 whole life participating policy. Because he is planning a family, he wants to increase his life insurance while keeping his costs down. Which of the following options would best suit his needs?

Rick could use the dividends to purchase paid-up additions.

Which dividend option allows the policyowner to use the dividend to offset the cost of a future premium payment?

Reduction of premium payments

What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage?

Extended term

Which nonforfeiture option is the "automatic" option?

Extended term option

All of the following are true regarding the reduced paid-up insurance nonforfeiture option for life insurance policies, EXCEPT:

The reduced paid-up insurance option allows the policyowner to purchase paid-up term coverage at a reduced face amount based on the amount of the policy cash value.

If used, this nonforfeiture option does not allow the policyowner to reinstate the original policy:

Cash surrender value