Life & Health Insurance Exam (National Portion)Policy Provisions, Options, and RidersEasy
A life insurance policyowner has the option to use the policy's dividends to purchase additional paid-up life insurance. Which dividend option is being utilized?
- APaid-Up Additions Option
- BCash Option
- CAccumulate at Interest Option
- DReduced Paid-Up Option
Show answer & explanationAnswer & explanation
Correct answer: A. Paid-Up Additions Option
The Paid-Up Additions Option uses policy dividends to purchase single-premium, additional life insurance coverage, increasing the policy's death benefit and cash value.
Why the other options are wrong
- B. The Cash Option pays the dividend directly to the policyowner.
- C. The Accumulate at Interest Option holds dividends to earn interest, rather than purchasing more insurance.
- D. Reduced Paid-Up is a nonforfeiture option, not a dividend option.
Paid-Up Additions Option
A dividend option where policy dividends are used to purchase additional single-premium, paid-up life insurance.
- Increases death benefit
- Increases cash value
- Purchases paid-up insurance with dividends
Memory trick: CASH for PAID-UP ADDITIONS or REDUCE INTEREST