Rhode Island Life Insurance Practice Exam

Choosing the Paid-Up Additional Insurance option is an effective strategy for K, who wants an increasing death benefit in her Whole Life policy to guard against the effects of inflation. This choice allows K to use her dividends to purchase additional coverage that is fully paid for, thereby increasing the overall death benefit without requiring additional premium payments.

As inflation erodes the purchasing power of money, the increasing death benefit helps ensure that the policy's value keeps pace with rising costs and that her beneficiaries will receive a more meaningful amount in the event of her passing.

The other options do not achieve the same aim of increasing the death benefit effectively. Cash Value Accumulation would simply allow the policy to grow but does not directly increase the death benefit. Term Insurance could provide a temporary solution but would not be permanent like Whole Life, and Reduced Paid-Up Insurance would entail a reduction in the death benefit, which contradicts K's desire for increased protection. Therefore, selecting Paid-Up Additional Insurance is the most aligned with K's goal to counter inflation effectively.