PSI Life Exam Practice Test

The accumulated cash value of a whole life insurance policy becomes the:

1. death benefit payable to the beneficiary

2. amount used to purchase paid up additions to the insured's policy

3. total premiums paid so far

4. policy dividend

The correct answer is: amount used to purchase paid up additions to the insured's policy

The accumulated cash value of a whole life insurance policy serves a specific function within the policy's framework. When a policyholder accumulates cash value, it can be utilized to purchase paid-up additions to the policy. Paid-up additions are essentially small, additional whole life insurance policies that increase the overall death benefit and cash value without requiring additional premium payments. This feature allows the policyholder to enhance their coverage and investment within the policy, resulting in a more robust financial instrument for their beneficiaries. While other aspects, such as the death benefit, total premiums paid, and dividends, are important to understand, they do not directly define the role of the accumulated cash value as it pertains to purchasing paid-up additions.