Unit 6: Life Insurance Policy Options

- taking dividends in cash, - applying dividends against premium payments, - leaving dividends with the company to accumulate at interest, - buying paid-up additions, and - buying 1-year term protection

5 common dividend options

using dividends to buy paid-up additions

Arnold buys a $25,000 participating whole life policy. He has a definite need for more life insurance but believes he cannot afford it. What kind of dividend option would help solve this problem automatically

$17,800

Beth is secondary beneficiary of a life policy, receiving monthly income benefits under an installment refund option. Her mother, the primary beneficiary, received a total of $4,200 in benefits before she died. Assuming Beth lives long enough, she will be paid monthly benefits until she has received a total of ____

Laura would receive $180 per month for as long as she lived, because with both individuals living they receive the full amount, with only one living individual

Carl and Laura receive $270 per month under a joint and two-thirds survivor life policy settlement option. What would happen if Carl died within a year after payment started?

whole life

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

- the length of the chosen period - the amount of the death benefit - a guaranteed interest rate

Factors that are used to calculate each payment with the fixed period option are:

interest-only option

Hector's spouse was the primary beneficiary of his $250,000 life insurance policy. She received payments of approximately $700 a month as long as she lived and, at her death, their 2 children received lump-sum payments of $125,000 each. What settlement option was in effect on Hector's policy?

Through a policy loan

How can the cash value accumulation in a straight whole life policy be accessed while the insured is living and while keeping the coverage in force?

- apply dividends to pay up a policy earlier than otherwise expected, - to buy paid-up permanent life insurance, - to buy 1 yr term insurance - to reduce future premium payments

How do most participating whole life insurance policies allow the policyowner to apply dividends?

must include a statement that dividends are not guarenteed

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

Reduced paid-up policy

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 until age 100. What non-forfeiture option could John's agent recommend to him?

continue to increase

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

Between the gross premiums charged and the actual experience of the insurer

Policy dividends are the difference between _____ and ____

Nothing, because life-only states that when the beneficiary dies, any remaining death benefit is kept by the insurance company?

Susan, the beneficiary on John's $500,000 life policy, chose life-only as her settlement option. Susan received 5 years of settlement checks from the insurance company, totaling $150,000. How much will Susan's beneficiary receive upon her death?

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

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?

nonforfeiture provision

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

the life only or straight life option

The settlement option that will pay the largest amount to the beneficiary regardless how long he lives is

increase the size of payments

Under a fixed-period life insurance settlement option, excess interest will

the same income payments until the total amount paid out to both beneficiaries equals the original amount of proceeds

Under an installment refund settlement option, if the primary beneficiary dies, the secondary beneficiary will receive

Automatic premium loan

Under which provision would the policyowner be protected should the policy be in danger of lapsing for nonpayment of premiums?

are not considered taxable income

Unlike corporate dividends, insurance policy dividends

Extended Term

What is the default non-forfeiture option?

A. 20-year period certain B. 5-year period certain C. 10-year period certain D. 15-year period certain Answer: 5-year period certain

Which of the following period certain income options would call for the highest payment rate per $1,000 of life policy proceeds?