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Life Insurance Policy

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Adam purchases a universal life policy. In his second year, he decides to pay a $1,000 premium. What happens to the cash value of his policy at this point?

adam's cash value is increased by $1,000
Front-end load is deducted from the premium and the premium is added to the cash value
Front-end load is deducted from the premium, the premium is added to the cash value, and the cost of insurance is deducted from the cash value
The front-end load is deducted from the premium, the premium is added to the cash value, and the current interest rate is credited to the cash value.

Correct - Your answer is correct.

Wrong - Your answer is wrong.

Detailed Answer

Correct answer: (D)
The front-end load is deducted from the premium, the premium is added to the cash value, and the current interest rate is credited to the cash value.

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