New York Insurance Exam Practice Question
What is the purpose of a life insurance policy's dividend?
Correct Answer: B
Rationale: A life insurance policy's dividend serves to provide a return of excess premiums (B), reflecting the insurer's financial performance and surplus. This dividend can be used in various ways, such as purchasing additional coverage or reducing future premiums.
Option A is incorrect as dividends do not increase premiums; rather, they may decrease the financial burden on policyholders. Option C is misleading because dividends do not waive the death benefit; they are separate financial benefits. Option D is also incorrect, as dividends do not cancel the policy; they offer policyholders additional financial options.
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