West Virginia State Life Insurance Practice Exam

S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT:

1. Policy’s cash value

2. Beneficiary’s age

3. Dividend amount

4. Insurance company's dividend scale

The correct answer is: Beneficiary’s age

When considering the use of dividends from a life insurance policy to purchase paid-up additions, several factors play a critical role in determining how much additional coverage can be obtained. The correct answer in this case is related to why the beneficiary's age does not impact the amount of coverage that can be purchased. The policy's cash value is significant because it reflects the growth and accumulation of funds within the policy, which can be used to secure additional coverage. The amount of dividends received is also a crucial factor since it dictates how much can be reinvested into purchasing paid-up additions. Additionally, the insurance company's dividend scale provides guidance on the potential for earning dividends, impacting how effectively dividends can be used for purchasing additional coverage. However, the age of the beneficiary does not influence how much coverage can be purchased with dividends. This is because the purchase of paid-up additions is based on the policyholder's current policy features and the terms set by the insurance company rather than factors pertaining to the beneficiary. The mechanism for utilizing dividends in this manner is more related to the policy itself rather than the beneficiary's demographic characteristics.