LLQP Life Insurance · Component 2.1 · 30% of the exam
Which statement about the 'accumulation' dividend option is correct?
- Dividends are left with the insurer to earn interest, withdrawable or paid with the death benefit
- BDividends buy additional paid-up insurance each year, increasing the death benefit and cash value without any further premium payment
- CDividends reduce the premium due each year, so the client's out-of-pocket cost falls as the dividend scale grows
- DDividends are paid in cash annually to the policyholder, who may spend or invest them as they choose
Correct answer: A) Dividends are left with the insurer to earn interest, withdrawable or paid with the death benefit
Accumulation at interest builds a side account, taxable annually on its interest, available to the policyholder and added to the death benefit if not withdrawn. It does not increase insurance coverage itself.
Why the other options are wrong
- BThat is the paid-up additions option.
- CThat is the premium reduction option.
- DThat is the cash option.
Exam tip
Accumulation = a savings side account, taxable interest, no added insurance.
Common mistake
Confusing accumulation with paid-up additions.
What this tests
CISRO competency component 2.1 — Analyze the available products that meet the client's needs — which is weighted at 30% of the Life Insurance module. Written against the published curriculum.
More from component 2
- A client has a need lasting about twenty years and compares a ten-year and a twenty-year term policy. The main point to explain is that:
- A client exercises the conversion privilege on his term policy. The permanent premium will be based on:
- A client notices that a small policy costs proportionately more per unit of coverage than a larger one. The explanation is that:
- A client wants to pay monthly rather than annually. The agent should explain that monthly payment:
- A client asks why dividends from her participating policy are not taxed like interest from a bank. The reason is that a dividend is:
- A universal life policyholder is choosing among the investment options inside her policy. She should understand that:
Practice the whole Life Insurance module
Timed sets weighted like the exam, and review of every question you miss. Free to start.