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 typically reduced by the amount of the withdrawal. This means that the remaining death benefit reflects the decreased value due to the amount taken out.

A) increased.

This option is incorrect because a partial withdrawal does not increase the death benefit. Instead, the death benefit is affected negatively by the amount withdrawn, leading to a decrease rather than an increase.

B) reduced.

This option is correct as a partial withdrawal directly decreases the death benefit. The policy's structure is designed such that the funds withdrawn will result in a lower amount payable upon the insured's death.

C) unchanged.

This option is incorrect since a partial withdrawal alters the total value of the policy. By taking funds out, the remaining death benefit will not be the same as it was prior to the withdrawal.

D) doubled.

This option is incorrect because a partial withdrawal cannot result in a doubling of the death benefit. The mechanics of universal life insurance dictate that withdrawals reduce the value of the policy, not enhance it.

Conclusion

The correct answer is that the death benefit is reduced when a partial withdrawal is made from a universal life insurance policy. This reduction is a direct consequence of the amount withdrawn, which directly lowers the remaining value of the policy. All other options misrepresent the impact of a withdrawal on the death benefit, highlighting the importance of understanding the terms of life insurance policies.