New York Insurance Exam Practice Question
What is the purpose of a policy's dividend option?
Correct Answer: B
Rationale: The purpose of a policy's dividend option is to provide options for using dividends (B). This allows policyholders to choose how to utilize any dividends earned, such as taking cash, purchasing additional coverage, or reducing premiums.
Option A, canceling the policy, misrepresents the function of dividends, which are rewards for policyholders, not a means to terminate coverage. Option C, waiving premiums automatically, refers to a separate feature often associated with riders, not dividends. Lastly, option D, increasing the death benefit, is a potential use of dividends but does not encompass the broader purpose of providing multiple options for their use.
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