Nonforfeiture Options

Paid-up additions

Dividend option in which the policyowner uses the dividend as a single premium to purchase an additional amount of whole life coverage. This dividend option increases the face amount of the policy.

Eddie wants to use a nonforfeiture option. Which of the following may Eddie not use? Select one: a. Cash surrender value b. Accumulation at interest c. Extended term d. None of the above

Nonforfeiture options/values are guarantees that are required by law to be part of life insurance policies that build cash value The correct answer is: Nonforfeiture option

The automatic dividend option is: Select one: a. Paid-up additions b. Cash payment c. One-year term d. Paid-up insurance

If the policyowner does not inform the insurer how they would like to receive the dividend, the insurer will automatically use the paid-up additions option. The correct answer is: Paid-up additions

Reduction of premium payments

Dividend option in which the dividend is used to offset the cost of a future premium payment.

Which nonforfeiture option is the "automatic" option? Select one: a. None b. Extended term option c. Reduced paid-up d. Cash surrender

If the policyowner cannot be reached, premium payments have ceased, and the policy's cash value is eliminated, the insurer will automatically use the extended term option. The correct answer is: Extended term option

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 policyholder determines the rate when additional insurance is purchased. The date of the policy and existence of other riders is not relevant for determining the rate. The correct answer is: The attained age of the insured when the additional insurance is purchased

What nonforfeiture option permits the policyowner to use the cash values to purchase paid-up term life insurance coverage? Select one: a. None b. Cash surrender value c. Extended term d. Reduced paid-up insurance

The extended term option permits the policyowner to use the policy's cash values to buy paid-up term insurance. The correct answer is: Extended term

Which dividend option allows the policyowner to use the dividend to offset the cost of a future premium payment? Select one: a. Reduction of premium payments b. Accumulation at interest c. One-year term d. Paid-up additions

The reduction of premium payments option allows the policyowner to use the dividend to offset the cost of a future premium payment. The correct answer is: Reduction of premium payments

Which of the following provisions allows a life insurance policy to continue beyond the grace period when a premium is overdue and not paid? Select one: a. Assignment clause b. Nonforfeiture option c. Consideration clause d. Insuring clause

When a life insurance policy premium is not paid and the grace period has lapsed, the extended term and reduced paid-up insurance nonforfeiture options allow coverage to continue. The correct answer is: Nonforfeiture option

Which life insurance dividend option does not increase a policy's cash value? Select one: a. Cash payment b. Accumulate at Interest c. Paid-up insurance d. Paid-up additions

With the cash payment dividend option, the policyholder is sent a check for the amount of the dividend, which does not increase the policy's cash value. The correct answer is: Cash payment

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? Select one: a. $10,000 b. $25,000 c. $50,000 d. $100,000

When Clarice exchanges her whole life policy for an extended term policy the amount of term insurance is equal to the original policy amount. The correct answer is: $100,000

When the extended term option is used, the face amount is: Select one: a. Equal to the original coverage b. Lower than the original coverage c. Higher than the original coverage d. The amount the cash value can purchase for the extended policy term

The cash value acts as a single premium to purchase the extended term coverage, and the amount of the paid-up coverage is equivalent to the original policy's face value. The correct answer is: Equal to the original coverage

This dividend option provides additional permanent coverage: Select one: a. Paid-up additions b. One-year term c. Accumulate at interest d. Cash payment

The paid-up additions dividend option uses the dividend as a single premium to purchase paid-up whole life coverage. The correct answer is: Paid-up additions

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? Select one: a. Dividends are not taxable. b. Dividends are usually paid on an annual basis. c. Dividends are actually a return of overcharged premiums. d. All of the above

Dividends are not taxable, are usually paid once a year, and are really a return of overcharged premiums. The correct answer is: All of the above

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? Select one: a. Extended term b. Cash surrender value c. Reduced paid-up insurance d. None

The reduced paid-up insurance option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the amount of the policy cash value. The correct answer is: Reduced paid-up insurance

If used, this nonforfeiture option does not allow the policyowner to reinstate the original policy: Select one: a. All nonforfeiture options b. Cash surrender value c. Extended term d. Reduced paid-up

The extended term and reduced paid up nonforfeiture options allow the policyowner to reinstate the original policy because coverage is still in effect. However, the cash surrender option does not allow the policy to be reinstated because the policy has been surrendered for its cash value, and no coverage remains. The correct answer is: Cash surrender value

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

Accumulation at interest is a dividend option. The correct answer is: Accumulation at interest

Which of the following nonforfeiture options does not allow the insured to reinstate the policy: Select one: a. None b. Extended term option c. Reduced paid-up d. Cash surrender

The extended term and reduced paid-up nonforfeiture options allow the policyowner to reinstate the original policy because coverage is still in effect. However, the cash surrender option does not allow the policy to be reinstated because the policy has been surrendered for its cash value, and no coverage remains. The correct answer is: Cash surrender

All of the following are true regarding the reduced paid-up insurance nonforfeiture option for life insurance policies, EXCEPT: Select one: a. With the reduced paid-up insurance option, the policy may be reinstated to the original face amount within the terms of the reinstatement provision. b. Any outstanding policy loans plus interest would be deducted from the cash surrender value prior to purchasing reduced paid-up insurance. c. 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. d. The cash values act as a single premium to purchase reduced paid-up insurance.

The reduced paid-up insurance option allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the amount of the policy cash value. The correct answer is: 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.

Which of the following is a guarantee that is required by law to be a part of life insurance polices that build cash value? Select one: a. Insuring clause b. Settlement option c. Nonforfeiture option d. Dividend option

Your answer is correct Reduced paid-up insurance is a nonforfeiture option. The correct answer is: Reduced paid-up insurance

All of the following are nonforfeiture options, EXCEPT: Select one: a. Cash surrender value b. Reduced paid-up insurance c. Accumulate at interest d. Extended term

Accumulate at interest is a dividend option. The correct answer is: Accumulate at interest

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? Select one: a. Rick could use his dividends to purchase one-year term insurance. b. Dividends could be applied against Rick's future premium payments. c. He could allow the dividends to accumulate at interest. d. Rick could use the dividends to purchase paid-up additions

Rick can use his dividends to purchase paid-up additions, without adding significantly to his costs. This option fulfills his need for increased coverage in the coming years as he starts his family. The correct answer is: Rick could use the dividends to purchase paid-up additions.