Pennsylvania Life and Health Insurance Exam Practice Question
An insured has a 20-pay life policy with a paid-up dividend option. In this option, the insured may
Correct Answer: C
Rationale: The paid-up dividend option allows the insured to utilize accumulated dividends to pay off the policy early. This means that instead of continuing premium payments, dividends can be applied to reduce or eliminate future premiums, effectively "paying up" the policy.
Option A is incorrect because it suggests waiving premium payments until cash values accumulate, which does not align with the paid-up dividend option.
Option B misinterprets the use of cash values, as the option specifically involves dividends rather than cash values for early payment.
Option D is inaccurate because it implies dividends are used to reduce premiums only after 20 years, whereas the paid-up option allows for earlier use.
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