New Jersey Life Insurance Exam Practice Question
Nancy purchased a life insurance policy with a face amount of $250,000. Over a period of years, the cash value in the policy accumulates to $50,000, and the face amount of the policy has become $300,000. This is an example of a
Correct Answer: B
Rationale: A participating whole life policy allows policyholders to receive dividends, which can increase the policy's cash value and face amount over time. In this case, the cash value has accumulated to $50,000 while the face amount has increased to $300,000, indicating that dividends are being reinvested.
Option A, a modified premium whole life policy, typically has lower premiums initially that increase later, which does not apply here. Option C, a limited pay life insurance policy, requires premiums for a set period but does not necessarily lead to an increased face amount. Option D, a universal life policy, offers flexible premiums and death benefits but does not inherently guarantee a growing face amount like a participating policy.
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