AD Banker Comprehensive Practice Exam

Which option typically allows for the least amount of insurance protection at death?

1. Extended term option

2. Reduced paid-up option

3. Cash surrender option

4. Paid up additions option

The correct answer is: Cash surrender option

The cash surrender option allows the policyholder to terminate the insurance policy and receive its cash value. In doing so, the policyholder relinquishes all death benefit protection. Therefore, at the time of death, no insurance coverage is provided since the policy has ceased to exist. This results in the least amount of insurance protection at death compared to the other options. The extended term option provides a reduced amount of insurance for a specified period using the cash value of the policy to purchase term insurance. The reduced paid-up option converts the whole life policy to a paid-up policy, maintaining a smaller death benefit without requiring further premium payments. Paid-up additions involve additional life insurance being purchased using dividends, allowing for increased death benefit protection. Thus, the cash surrender option distinctly stands apart as it eliminates the death benefit entirely upon termination of the policy, making it the option with the least insurance protection at death.