Question: The interest earned on dividends is:

1. Taxable

2. b. Tax deductible

3. c. Nontaxable

4. d. 40% taxable, similar to a capital gain

5. Answer: a. Taxable

6. The dividends themselves are not taxable, but any interest earned on the dividends is taxable.

7. Question: Mona let her permanent policy lapse. She discovered there was $2,498 in cash remainaing in the policy and decided to reduce her debt load. She exercised which Nonforfeiture Option?

8. a. Accumulation at Interest

9. b. Cash Surrender

10. c. Fixed Amount

11. d. Accelerated Endowment

12. Answer: b. Cash Surrender

13. The only Nonforfeiture Option listed is Cash Surrender. Mona surrenders the policy for its cash value and then uses that cash value to reduce her debt load.

14. Question: Settlement Options may be used if the insured dies or if the insured:

15. a. Pays policy annually.

16. b. Is covered strictly with Term Insurance.

17. c. Is alive at maturity and receives the face amount.

18. d. Exercises the Irrevocable Option.

19. Answer: c. Is alive at maturity and receives the face amount.

20. Settlement options are used when the insured lives to the endowment date or at the insured’s death.

21. Question: The cash received by the policyowner when he/she terminates a policy is known as what?

22. a. Accrued Premium Value

23. b. Loan Value

24. c. Paid-Up Insurance Value

25. d. Cash Surrender Value

26. Answer: d. Cash Surrender Value

27. The Cash Surrender Value is the Nonforfeiture Option that allows the owner to withdraw the cash value upon the surrender of the policy.

28. Question: Which is not a Dividend Option?

29. a. Reduced Paid-Up

30. b. Paid-Up Additions

31. c. Paid in Cash

32. d. Accumulate at Interest

33. Answer: a. Reduced Paid-Up

34. Reduced Paid-Up is a Nonforfeiture Option; the other answer chronicles are Dividend Options.