Question

The paid up addition option uses the dividend

A. To reduced the next year's premium
B. To accumulate additional savings for retirement
C. To purchase a smaller amount of the same type of insurance as the original policy
D. To purchase a one-year term insurance in the amount of the cash value

Answer 1

The paid-up addition option uses dividends to buy additional life insurance, increasing the death benefit and cash value of the policy, which can support retirement savings.

Step-by-step explanation:

The paid-up addition option in a life insurance policy allows dividends to be used C. To purchase a smaller amount of the same type of insurance as the original policy. This means that the dividends earned on the policy are used to buy additional life insurance, which increases the death benefit and cash value of the policy without requiring the policyholder to pay more in premiums. This can be an effective way to accumulate additional savings for retirement, as the cash value of a life insurance policy can be withdrawn or borrowed against in retirement.