Question

P is insured on a participating life policy. Which statement is true if P's premiums are waived due to a disability?

1) The policy will continue to accumulate dividends
2) The policy will be converted to a term policy
3) The policy will be terminated
4) The policy will be converted to a whole life policy

Answer 1

When premiums are waived due to a disability for a participating life policy, the policy continues to maintain its features and accumulate dividends. It remains a whole life policy with all its original benefits.

Step-by-step explanation:

When a policyholder with a participating life policy becomes disabled and qualifies for a waiver of premium, the policy will continue to accumulate dividends. This means that even though the policyholder is not paying the premiums due to the disability, the policy remains in full effect, retaining all its features including its cash value growth and death benefits. It does not convert to a term policy, get terminated, or convert to a whole life policy as it is already a type of whole life insurance.