Question 16

Paid-Up Additions will increase the death benefit.

Paid-Up Additions are additional amounts of insurance that can be purchased using dividends, which directly increase the overall death benefit of the policy.

A) Guaranteed Insurability.

Guaranteed Insurability allows the policyholder to purchase additional coverage at specified times without evidence of insurability. While this option can increase coverage, it is not directly related to the use of dividends to increase the death benefit.

B) Reduction of Premium.

Reduction of Premium refers to using dividends to lower the premium payments due on the policy. This option does not contribute to an increase in the death benefit, as it simply modifies the cost of maintaining the policy rather than enhancing its value.

C) Paid-Up Additions.

Paid-Up Additions are a method of using dividends to purchase additional insurance that does not require further premiums, thereby increasing the death benefit. This option directly contributes to the overall value of the policy in the event of a claim.

D) Spouse Term Rider.

A Spouse Term Rider provides temporary coverage for a spouse but does not affect the policyholder's death benefit. This option is separate from the main policy and does not utilize dividends to enhance the death benefit.

Conclusion

Paid-Up Additions are the only option that directly increases the death benefit by using dividends to purchase additional coverage. In contrast, the other options either modify premium payments or provide separate coverage without enhancing the policy's death benefit. This distinction is crucial for policyholders looking to maximize their insurance benefits.