Question 90

It requires only one payment to make the policy paid up.

A single premium cash value policy is characterized by the requirement of only one payment to fully fund the policy, making it paid up immediately.

A) It requires only one payment to make the policy paid up.

This statement accurately describes a single premium cash value policy, as it indicates that the policy is fully funded with a single payment, eliminating the need for future premiums. This structure allows the policy to accumulate cash value right away.

B) It provides for only one premium to be paid without evidence of insurability.

While a single premium cash value policy does involve one payment, this option incorrectly suggests that it does not require evidence of insurability. Most insurance policies, including single premium ones, typically require underwriting and proof of insurability.

C) It waives one future premium if the owner becomes disabled.

This statement is irrelevant to a single premium cash value policy. Waiver of premium benefits usually pertains to different policy types and does not apply to the single premium structure, which is already paid up with one payment.

D) It requires the policyowner to pay one premium annually.

This option incorrectly describes the nature of a single premium cash value policy. Instead of annual payments, this type of policy requires a one-time payment, making it distinct from policies that necessitate ongoing annual premiums.

Conclusion

The correct answer, A, clearly defines the essence of a single premium cash value policy, emphasizing that it requires only one payment to be fully paid up. In contrast, all other options fail to accurately represent the characteristics of this policy type, either misrepresenting its payment structure or introducing unrelated terms.