Tennessee Life Producer Practice Exam

When using dividends to purchase paid-up additions, which factor does NOT determine the amount of coverage purchased?

1. Beneficiary's age

2. Insured's health status

3. Policy cash value

4. Insurance company policies

The correct answer is: Beneficiary's age

In the context of using dividends to purchase paid-up additions, the amount of coverage purchased is influenced by several critical factors, but the beneficiary's age is not one of them. Dividends are typically based on the performance of a life insurance policy, and when they are used to buy paid-up additions, the amount of additional coverage that can be obtained is determined by factors such as the insured's health status, the cash value of the policy, and the specific policies of the insurance company. The age of the beneficiary does not impact the calculation of how much coverage can be acquired using dividends because the amount of coverage gained through paid-up additions is primarily affected by the insured's current status, cash values, and company policies rather than the beneficiary’s demographic characteristics. This distinction is essential for understanding how life insurance dividends work and what criteria insurance companies consider when allowing policyholders to increase their coverage through the purchase of additional benefits.