Chapter 5.5 : Options

Discipline: Business

Type of Paper: Question-Answer

Academic Level: High school

Paper Format: APA

Pages: 1 Words: 275

Question

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

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

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

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

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

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
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

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.

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
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

Which of the following is not a dividend option?
Select one: a. Reduction of premium payments b. Paid-up additions c. Reduced paid-up insurance d. Cash payments
Reduced paid-up insurance is a nonforfeiture option.
The correct answer is: Reduced paid-up insurance