Question 1

The surrender amount would not need to be repaid.

When a partial surrender of cash value is made from a Universal Life Policy, the amount surrendered does not require repayment, allowing policyholders to access funds without incurring debt.

A) increase the face amount.

This option is incorrect because a partial surrender of cash value does not increase the face amount of the policy. In fact, it typically reduces the death benefit, as the cash value taken out decreases the overall value of the policy.

B) not need to be repaid.

This option is correct. In Universal Life Policies, when a policyholder makes a partial surrender, the amount taken does not require repayment. This characteristic makes it an attractive feature for those needing access to cash without the obligation of repaying a loan.

C) increase the cash value.

This option is incorrect. A partial surrender of cash value would result in a decrease in the cash value of the policy since the policyholder is withdrawing funds from it.

D) have to be repaid.

This option is incorrect. Unlike loans taken against the cash value of a life insurance policy, a partial surrender does not create a debt obligation, meaning the amount surrendered does not need to be repaid.

Conclusion

The correct answer, that the surrender amount would not need to be repaid, underscores the flexibility of Universal Life Policies in allowing access to funds without incurring additional debt. Other options fail because they either misrepresent the mechanics of the policy or incorrectly imply obligations that do not exist when a partial surrender is made.