Question

16) Beth purchased a participating life insurance policy 15 years ago. Her life insurance needs have decreased dramatically since she purchased the policy. Beth's job situation has become uncertain and she no longer wants to continue to make premium payments on her whole life policy. Which non-forfeiture option makes sense for Beth to use? A) extended term option B) interest only option C) reduced paid up option D) paid-up additions

Answer 1

In this case, the Beth can use the reduced paid up option (option C). Reduced paid-up insurance would allow the death benefit to remain in place without her being required to pay any future premiums. However, the death benefit is reduced to the amount of cash value that she had in her original life insurance policy. Also since the policy is already 15 years old, there wont be any big haircut in the policy benefit either thus largely preserving the value of already paid premiums by Beth.