Question 39

Paid-up additions will increase the death benefit.

Paid-up additions are a form of participating insurance that allows policyholders to add to their death benefit without needing to prove insurability. This option increases both the cash value and the death benefit of the policy.

A) Guaranteed insurability.

Guaranteed insurability allows policyholders to purchase additional coverage at specified times without medical underwriting, but it does not automatically increase the death benefit unless additional policies are purchased. Thus, while it provides flexibility in acquiring more coverage, it does not directly result in an increase of the existing death benefit.

B) Accelerated endowment.

An accelerated endowment typically allows for the policy to mature earlier, providing benefits sooner, but it does not enhance the death benefit. Instead, it alters the timing of benefits rather than increasing the total amount available upon death.

C) Paid-up additions.

Paid-up additions are additional amounts of coverage that can be purchased with dividends, leading to an increase in the overall death benefit. This option effectively adds to the policy's value and ensures that the death benefit grows over time, making it the correct choice.

D) Extended term.

Extended term insurance provides a way to use the policy's cash value to purchase term insurance for a specific period, but it does not increase the death benefit. Instead, it maintains the existing death benefit for a limited time without contributing to its growth.

Conclusion

Paid-up additions are the only option among the provided choices that directly lead to an increase in the death benefit, enhancing the policy's value over time. All other options either modify the timing of benefits or do not contribute to increasing the death benefit, making them less effective in this context.