Dividends

One source of funds from which life insurance policy dividends are paid is Investment Experience. This is when A. Invested premiums earn a higher return than was assumed B. Invested premiums earn a higher return than was assumed C. Fewer insureds die than actuarially projected, therefore, fewer death claims were paid D. The cost of operating the company is less than assumed.

B. Invested premiums earn a higher return than was assumed

The interest earned on a policy dividends is A. 40% taxable, similar to a capital gain B. Taxable C. Nontaxable D. Tax deductible

B. Taxable

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT A. The interest is credited at a rate specified by the policy B. The policyholder has the right to withdraw the accumulation at any time C. The interest is not taxable since it remains inside the insurance policy D. The annual dividend is retained by the company

C. The interest is not taxable since it remains inside the insurance policy

The source of funds from which life insurance policy dividends are paid include all of the following EXCEPT A. Investment experience B. Operating expenses (loading) C. Mortality D. Loss of insureds

D. Loss of insureds

All of the following are dividend options EXCEPT A. Fixed-period installments B. Accumulated at interest C. Reduction of premium D. Paid-up additions

A. Fixed-period installments

The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the A. One-year term option B. Paid-up option C. Accelerated endowment D. Paid-up additions

A. One-year term option

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use? A. Reduction of premium B. Accumulation at interest C. Paid-up option D. One-year term

C. Paid-up option

An insured receives an annual life insurance dividend check. What term best describes this arrangement? A. Reduction of Premium B. Annual Dividend Provision C. Accumulation at Interest D. Cash option

D. Cash option

L&D Insurance earned a higher return on their invested premiums than they expected to. They will use this money to pay dividends on life insurance policies. This is called A. Good Planning B. Operating Expenses C. Mortality D. Investment Experience

D. Investment Experience

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? A. Paid-up addition B. Accumulation at interest C. Cash option D. Reduction of premium

D. Reduction of premium