Question 73

The death benefit is reduced when a partial withdrawal is made from a universal life insurance policy.

When a partial withdrawal is made from a universal life insurance policy, the death benefit is reduced. This is because the amount withdrawn decreases the overall value of the policy, leading to a lower payout upon the policyholder's death.

A) increased.

This option is incorrect because withdrawing funds from a universal life insurance policy does not increase the death benefit. Instead, any amount withdrawn decreases the total value of the policy, which directly reduces the death benefit.

B) reduced.

This option is correct as it accurately reflects the impact of a partial withdrawal on the death benefit of a universal life insurance policy. The death benefit is reduced by the amount withdrawn, leading to a lower payout to beneficiaries.

C) unchanged.

This option is incorrect because a partial withdrawal affects the death benefit. The policy's value decreases due to the withdrawal, which means that the death benefit will also decrease, making this option false.

D) doubled.

This option is incorrect since a partial withdrawal would never result in a doubling of the death benefit. Withdrawals decrease the policy's overall value, thus having the opposite effect on the death benefit.

Conclusion

The correct answer is that the death benefit is reduced when a partial withdrawal is made from a universal life insurance policy. This is in contrast to the other options, which incorrectly suggest that the death benefit is increased, unchanged, or doubled. Understanding how partial withdrawals impact the death benefit is essential for policyholders in managing their insurance effectively.