Question

K owns a whole life policy. If K wants an increasing Death Benefit to protect against inflation, which dividend option should she choose?

A) Cash Dividend
B) Paid-up Additions
C) Reduced Paid-up Insurance
D) Accumulation at Interest

Answer 1

If K wants an increasing Death Benefit to protect against inflation, she should choose Option B) Paid-up Additions as the dividend option for her whole life policy.

Step-by-step explanation:

If K wants an increasing Death Benefit to protect against inflation, she should choose Option B) Paid-up Additions as the dividend option for her whole life policy.

Paid-up Additions allow the policyholder to use dividends to purchase additional coverage, which gradually increases the policy's death benefit over time. This can help offset the impact of inflation by providing more coverage as the cost of living increases.

By choosing Paid-up Additions, K can ensure that her policy keeps pace with inflation and provides the necessary financial protection for her beneficiaries.