SCI M9 – Life Insurance And Investment-Linked Policies

Correct: Statement I is correct because limited payment whole life policies are specifically designed to allow the policyholder to pay premiums for a predetermined duration, such as until a specific age, while the insurance protection continues for the rest of the insured’s life. Statement II is correct because participating policies are structured to provide a guaranteed death benefit alongside non-guaranteed bonuses, which are determined by the performance of the insurer’s participating fund.

Incorrect: Statement III is incorrect because non-participating policies do not offer bonuses or a share in the insurer’s profits; they provide fixed, guaranteed benefits usually at a lower premium cost than participating plans. Statement IV is incorrect because traditional whole life policies generally do not accumulate any cash value in the very early years, as the initial premiums are primarily used to cover the insurer’s administrative and distribution costs.

Takeaway: Whole life insurance offers permanent protection, where limited payment options provide premium certainty and participating features allow for potential growth through non-guaranteed bonuses. Therefore, statements I and II are correct.

Correct: The statement that an assignee is protected from policy defects is the right answer because, under the law of assignment, an assignee only receives the rights that were actually available to the assignor. If a policy is void from the beginning due to fraudulent non-disclosure or misrepresentation by the original owner, the assignee cannot recover the policy proceeds because they take the policy subject to those existing defects.

Incorrect: The statement regarding written notice is wrong because serving a written notice to the insurer is a mandatory statutory requirement for an absolute assignment to be legally effective. The statement about trust policies is wrong because once a policy is placed under a trust, the policy owner loses the unilateral right to assign it and must obtain written consent from the beneficiaries. The statement about collateral assignment is wrong because it accurately describes how rights revert to the original owner once the underlying debt or condition is satisfied.

Takeaway: An assignee cannot acquire better legal rights than the assignor possessed; therefore, any pre-existing defects in the policy contract will continue to affect the assignee’s ability to claim benefits.

Correct: Explaining that the contract remains valid and assisting with a written request and statutory declaration is the right course of action. The policy document serves as evidence of the agreement, but its loss does not cancel the underlying insurance protection. To get a duplicate, the owner must confirm the policy hasn’t been assigned to someone else and provide an indemnity to protect the insurer.

Incorrect: The suggestion that coverage is voided or requires a police report for a simple loss is incorrect, as police reports are specifically for theft. Advising a new medical exam is wrong because the loss of paperwork does not change the insured’s health status or the original terms of the risk. Stating that claims cannot be paid without the original document is false, as insurers can process claims using a letter of indemnity even if the original is missing.

Takeaway: A life insurance contract remains in force even if the physical document is lost, provided the policyholder completes the necessary administrative requirements like a statutory declaration and indemnity.

Correct: Statement III is correct because it provides an inaccurate description of non-participating policies. Non-participating policies do not entitle the policyholder to any share of the insurance company’s surplus or profits; instead, they provide only the fixed, guaranteed benefits specified at the start of the contract.

Incorrect: Statement I is incorrect because whole life insurance is indeed designed to provide permanent, lifelong protection and typically builds up a cash value that can be accessed by the policyholder. Statement II is incorrect because term insurance is correctly defined as a cost-effective method for obtaining high protection for a specific duration without any savings or cash value component. Statement IV is incorrect because endowment policies are accurately described as products that combine savings and protection, paying out the sum assured at the end of a fixed term or upon the death of the insured.

Takeaway: The fundamental difference between participating and non-participating policies is that only participating policies allow the policyholder to share in the insurer’s surplus through the distribution of non-guaranteed bonuses. Therefore, statement III is correct.

Correct: Statement I is correct because when an insurer waives premiums, they are essentially paying them on behalf of the policy owner, which allows cash values to continue accumulating and keeps the death benefit intact. Statement III is correct because the standard definition of total and permanent disability (TPD) includes specific physical losses, such as the irrecoverable loss of sight in both eyes, which are deemed total disability regardless of the insured’s specific occupation.

Incorrect: Statement II is incorrect because the rider has a specific expiry age, usually 60 or 65; if the disability occurs after this age, the rider is no longer effective and premiums must still be paid. Statement IV is incorrect because there is a mandatory waiting period, typically six months, during which the policyholder must continue paying premiums to keep the policy in force before the waiver can be approved.

Takeaway: The Waiver of Premium rider preserves a policy’s benefits and growth during disability, but it is subject to a waiting period and an expiry age beyond which coverage for new claims ceases. Therefore, statements I and III are correct.

Correct: The insurer may choose to reinstate the basic life policy while declining to reinstate the attached rider is the right answer because although riders are attached to a basic policy, the insurer is not obligated to reinstate them after a policy lapse. Even if the insurer agrees to reinstate the primary life insurance contract, they reserve the right to refuse the reinstatement of supplementary benefits based on their current assessment of risk.

Incorrect: The claim that the insurer is required to reinstate the rider automatically is wrong because the reinstatement of supplementary benefits is at the insurer’s discretion and is not a guaranteed right for the policyholder. The suggestion that a rider can be kept as a standalone policy is incorrect because riders are supplementary by nature and cannot exist without an active basic policy. The statement regarding extending the rider’s term beyond the basic policy is wrong because a rider’s duration is legally permitted to be equal to or shorter than the basic policy, but never longer.

Takeaway: A policyholder cannot assume that all supplementary benefits will be restored after a lapse, as insurers have the right to reinstate the basic policy while excluding specific riders.

Correct: Advising the client that both the policy owner and the trustee must sign the loan agreement is the right action because policies held under trust frameworks require the consent and formal signatures of all relevant parties to access the policy’s cash value. This ensures the interests of the beneficiaries are protected as intended by the trust structure.

Incorrect: The suggestion that the policy owner can sign unilaterally is wrong because trust policies legally involve a trustee whose authorization is required for such transactions. The idea that interest only begins at the policy anniversary is incorrect, as interest on policy loans accrues on a daily basis from the moment the loan is issued. The claim that a trustee’s signature is only needed for loans exceeding a specific percentage of the sum assured is a misconception, as the requirement for joint signatures applies to any loan amount on a trust policy.

Takeaway: For life insurance policies held under a trust, any application for a policy loan must be signed by both the policy owner and the trustee to be valid.

Correct: The policy owner will be subject to the suicide and incontestability clauses once again from the date of reinstatement is the right answer because reinstatement is not a simple continuation of the old policy; it triggers a reset of these specific legal protections for the insurer to prevent individuals from taking advantage of the system.

Incorrect: The claim that the insurer is legally required to reinstate on original terms is wrong because the insurer has the right to evaluate the life insured’s current health and may impose new conditions or reject the request. The suggestion that only the most recent premium is due is wrong because the policyholder is required to pay all past-due premiums plus interest to restore the policy. The idea that the original incontestability period continues is wrong because the policyholder is specifically made subject to this clause again as a condition of the reinstatement process.

Takeaway: Reinstatement requires the payment of all arrears with interest and results in the resetting of the suicide and incontestability periods.

Correct: The principle that a loss must not be catastrophic to the insurer ensures that a single event cannot cause total financial ruin to the insurance company. If a risk, such as a nuclear disaster, could potentially bankrupt the insurer, they cannot responsibly promise to pay benefits to their policyholders, making such risks uninsurable.

Incorrect: The principle regarding significant financial terms is wrong because it actually refers to excluding minor losses, like a common cold, where the administrative costs of processing the claim would make the insurance premium too expensive. The principle that a loss must occur by chance is wrong because it focuses on the accidental nature of the event and the fact that the timing must be beyond the insured’s control. The principle that a loss must be definite is wrong because it relates to the insurer’s ability to verify that a loss has actually occurred and to determine the specific amount of money lost through appraisal or prior agreement.

Takeaway: A risk is only considered insurable if its occurrence would not cause catastrophic financial damage to the insurer, thereby protecting the insurer’s solvency and its ability to pay all claims.

Correct: Informing the insurer of the bankruptcy status is the right answer because once a policy owner is declared bankrupt, their legal interest in the life insurance policy is vested with the Official Assignee. The advisor is required to notify the insurer so that the company can coordinate directly with the Official Assignee regarding the policy’s value and any potential claims.

Incorrect: The option to process the surrender request using a discharge voucher is wrong because a bankrupt individual no longer has the legal authority to surrender the policy or claim the cash value for themselves. The suggestion to convert the plan to a paid-up policy is incorrect because, while this is a standard alternative to surrender for most clients, it cannot be initiated by the policy owner once bankruptcy proceedings have vested the policy interest in the Official Assignee. The option regarding a deed of assignment is wrong because the policy owner cannot transfer ownership to a third party to avoid the policy being included in the bankruptcy estate; the insurer must instead liaise with the Official Assignee.

Takeaway: When a policy owner becomes bankrupt, they lose the right to surrender the policy as the interest vests with the Official Assignee, and the advisor must ensure the insurer is notified to facilitate proper legal coordination.

Correct: Statement I is correct because if a policy provides for 100% acceleration of the death benefit upon a critical illness diagnosis, the policy terminates once the benefit is paid. Consequently, there are no remaining premiums to waive, making the rider redundant. Statement III is correct because insurers typically list the commission of a crime as a standard exclusion; if disability arises from such an act, the insurer will not waive premiums, and the owner must continue payments to prevent the policy from lapsing.

Incorrect: Statement II is incorrect because most supplementary riders (with the specific exception of the Extended Total and Permanent Disability Rider) are terminated the moment the first installment of a disability benefit is paid, rather than waiting for the final payment. Statement IV is incorrect because the standard aggregate limit for Total and Permanent Disability benefits across all policies held with a single insurer is typically S$2,000,000, not S$5,000,000.

Takeaway: Supplementary riders are subject to specific exclusions and termination rules, particularly regarding how they interact with the base policy’s death benefit and the commencement of benefit installments. Therefore, statements I and III are correct.

Correct: Recommending an Additional Benefit Critical Illness Rider is the right action because this rider pays out a sum that is entirely separate from the basic policy. The payment of the rider benefit does not diminish the sum assured of the main policy, allowing the full death benefit to remain intact for the beneficiaries as requested.

Incorrect: Proposing a 50% acceleration benefit is incorrect because it pre-pays a portion of the death benefit, which would reduce the final amount paid to the children by half. Suggesting a 100% acceleration benefit is incorrect because it would pay out the full sum upon illness and terminate the policy entirely, leaving no death benefit at all. Advising a bundled policy that pays on the first event is incorrect because the critical illness claim would exhaust or reduce the available funds for a subsequent death claim.

Takeaway: An additional benefit rider provides a critical illness payout without reducing the main policy’s death benefit, whereas acceleration riders reduce the death benefit by the amount claimed.

Correct: Statement I is correct because the law defines specific family members, including siblings, as proper claimants who are entitled to receive policy proceeds to ensure the insurer fulfills its contractual obligations. Statement II is correct because an insurer is entitled to verify the identity and relationship of a person claiming the proceeds, often by requesting a formal statutory declaration to confirm they fall within the legal definition of a proper claimant.

Incorrect: Statement III is incorrect because insurers may offer several settlement options other than a lump sum, such as paying the proceeds in equal installments over a fixed number of years or as a life income. Statement IV is incorrect because, for the purpose of identifying proper claimants, the law explicitly treats an illegitimate child the same as a legitimate child of the parents.

Takeaway: Proper claimants include a specific list of relatives such as spouses, children (including illegitimate ones), parents, and siblings, and they may have access to various settlement methods beyond a simple lump sum payment. Therefore, statements I and II are correct.

Correct: Explaining that the claimant must demonstrate a permanent neurological deficit persisting for at least six weeks, confirmed by a consultant neurologist and a lumbar puncture, is the right answer because critical illness riders require the condition to strictly meet specific technical and diagnostic criteria before a benefit is payable.

Incorrect: The claim that a general practitioner’s diagnosis or a blood test is sufficient is wrong because the policy specifically requires confirmation by a specialist neurologist and a lumbar puncture test. The statement regarding eligibility regardless of HIV status is wrong because the presence of HIV is a specific exclusion for this condition. The suggestion that viral meningitis is covered is wrong because the rider only covers bacterial infections that meet the standardized definition.

Takeaway: Critical illness benefits are only payable if the diagnosis fully satisfies the technical definitions and diagnostic requirements specified in the policy contract.

Correct: Statement I is correct because insurance regulations allow an insurer to pay out up to $150,000 to a proper claimant without requiring a grant of probate or letters of administration. Statement II is correct because the claimant is typically responsible for any fees associated with the attending physician’s statement. Statement III is correct because a certified true copy of the death certificate is a standard and necessary document for the insurer to process a death claim.

Incorrect: Statement IV is incorrect because while the original policy was traditionally required, it is not a mandatory legal requirement for all insurers. Many insurance companies have now waived the requirement to produce the original policy document to streamline the claims process.

Takeaway: Insurers can simplify the claims process by paying out up to $150,000 without probate, provided the claimant submits standard documentation such as death certificates and physician statements. Therefore, statements I, II and III are correct.

Correct: Evidence that the life insured is still alive is the right answer because Pure Endowment policies are specifically structured to provide a payout only if the life insured survives until the end of the policy term.

Incorrect: The physician’s statement is wrong because this document is typically required to verify the extent of a disability in total and permanent disability claims, not for maturity. The Grant of Probate is wrong because it is a legal document used to settle death claims when a will exists, which is irrelevant to a maturity claim. The statement regarding assignments is wrong because while insurers must verify the rightful owner, the specific requirement for a Pure Endowment is the proof of survival of the life insured.

Takeaway: For Pure Endowment insurance, the insurer requires proof of survival before settling a maturity claim to ensure the conditions of the policy have been met.

Correct: To prevent the policyholder from cancelling the rider when the declining sum assured appears too small relative to the level premium is the right answer because as the coverage amount drops annually while the premium stays the same, the value of the rider decreases. By stopping premiums early, insurers encourage the client to maintain the protection instead of lapsing it due to the high cost relative to the small remaining benefit.

Incorrect: The explanation regarding interest earnings is wrong because the early cessation of premiums is a retention strategy to prevent lapses, not an actuarial requirement based on investment growth. The statement about mandatory regulations is incorrect because this feature is a common industry practice for product design rather than a legal requirement. The option about providing mortgage liquidity is wrong because the saved premiums are not intended for debt repayment, but rather to ensure the rider remains in force until the mortgage is fully covered.

Takeaway: Insurers often stop premium payments for decreasing term riders before the term ends to prevent policyholders from dropping the coverage when the benefit amount becomes very low.

Correct: Statement II is correct because the Clinical Abstract Application form is a mandatory legal requirement that provides the insurer with the necessary authorization to access the deceased’s medical records from healthcare providers. Statement III is correct because when a name discrepancy exists between the death certificate and the insurance policy, a deed poll serves as the official legal evidence required to verify that both names refer to the same individual.

Incorrect: Statement I is incorrect because a statutory presumption of death issued by a court is not legally binding on an insurance company; the insurer maintains the right to conduct its own independent investigations into the disappearance. Statement IV is incorrect because insurers are specifically permitted to accept a service certificate of death as valid proof in situations where the physical remains of service personnel cannot be located.

Takeaway: Claimants must provide specific legal authorizations and identity documents to facilitate claim processing, and insurers retain the right to independently verify deaths even when court-ordered presumptions exist. Therefore, statements II and III are correct.

Correct: Statement I is correct because the Guaranteed Insurability Option (GIO) is designed so that failing to exercise one specific option does not result in the forfeiture of future options at subsequent specified dates or events. Statement III is correct because Accidental Death Benefit (ADB) riders typically exclude coverage for injuries or death sustained while traveling in non-commercial aircraft, particularly when the insured is acting as a crew member or pilot.

Incorrect: Statement II is incorrect because the premium for any additional insurance purchased through a GIO rider is calculated based on the life insured’s age at the time the option is actually exercised, rather than the age when the policy was first issued. Statement IV is incorrect because the defining feature of a GIO rider is the right to purchase additional coverage without providing any evidence of insurability or undergoing further medical examinations.

Takeaway: The Guaranteed Insurability Option allows for periodic coverage increases regardless of health changes, while Accidental Death Benefit riders provide additional payouts for specific accidental events, subject to standard exclusions like non-commercial aviation. Therefore, statements I and III are correct.

Correct: The LIA Register is specifically designated for death and maturity proceeds that have been outstanding for at least 12 months. This classification ensures that the most significant life insurance payouts reach beneficiaries when standard contact attempts by individual insurers fail.

Incorrect: The suggestion that disability or critical illness benefits are included is wrong because the industry register only tracks death and maturity proceeds, and the 6-month period is too short. The mention of surrender values and annuity payments is incorrect as these are not the categories listed in the industry-wide register, and the 24-month threshold is inaccurate. The option regarding hospital cash or expense claims is wrong because health-related reimbursements are excluded from this specific database, and the 18-month timeframe is not the industry standard.

Takeaway: Only death and maturity proceeds that have been outstanding for more than 12 months are classified for inclusion in the LIA Register of Unclaimed Life Insurance Proceeds.

Correct: Statement I is correct because Critical Illness riders are classified into two distinct types: acceleration benefits, which reduce the basic policy’s sum assured upon payment, and additional benefits, which are paid on top of the basic sum. Statement III is correct because the Hospital Cash Benefit Rider is specifically designed to pay a fixed daily amount from the first dollar of hospitalisation, which helps the insured cover the deductibles or co-insurance required by their main medical expense insurance.

Incorrect: Statement II is incorrect because a Term Rider is a specific classification of benefit that can only be attached to a permanent policy, such as a Whole Life or Endowment policy, rather than being attached to other term policies. Statement IV is incorrect because a key regulatory feature of all riders is that they do not have cash value and will automatically terminate if the basic policy is converted into a paid-up or extended term insurance policy.

Takeaway: Understanding the classification of riders is essential, as they provide low-cost supplementary coverage that is strictly dependent on the active status and type of the underlying basic policy. Therefore, statements I and III are correct.

Correct: Statement I is correct because in the formation of a life insurance contract, the act of the proposer submitting a completed proposal form along with the first premium payment constitutes the legal offer. Statement III is correct because the contract is only finalized when the insurer provides unconditional acceptance, which is typically evidenced by the issuance of the policy document. Statement IV is correct because, under contract law, an offeror has the right to withdraw their offer at any time before it has been formally accepted by the offeree.

Incorrect: Statement II is incorrect because the receipt of a premium payment by a financial consultant does not automatically create a binding contract. For a valid contract to exist, there must be a “meeting of minds” or consensus ad idem, which occurs only after the insurer has reviewed the application and issued a formal acceptance.

Takeaway: A life insurance contract is legally formed only when an offer (proposal and premium) is met with an unconditional acceptance (policy issuance), and the proposer retains the right to withdraw the offer until that acceptance occurs. Therefore, statements I, III and IV are correct.

Correct: Statement I is correct because the insurer is legally obligated to pay all guaranteed benefits regardless of the fund’s performance; if the participating fund lacks sufficient assets, the insurer must use its own capital to cover the shortfall. Statement III is correct because when non-participating policies or riders are written into the participating fund, their financial experience (such as claims and expenses) directly impacts the fund’s overall surplus, which in turn affects the bonuses available for participating policyholders.

Incorrect: Statement II is incorrect because common riders like accidental death or critical illness are typically non-participating, meaning they provide fixed benefits and do not share in the profits or surplus of the participating fund. Statement IV is incorrect because the investment mix of a participating fund is not fixed; the insurer may adjust the proportion of assets like equities, bonds, and property over time to align with their investment strategy and market conditions.

Takeaway: While participating policies are the primary beneficiaries of a participating fund’s surplus, the fund’s performance and subsequent bonus levels are influenced by all components within the fund, including non-participating riders and active investment management. Therefore, statements I and III are correct.

Correct: Statement I is correct because the law permits individuals who have reached the age of 16 to enter into insurance contracts independently without requiring written consent from a parent or guardian. Statement IV is correct because standard marketing materials like brochures and advertisements are legally classified as invitations to treat, which invite the public to make an offer rather than being binding offers themselves.

Incorrect: Statement II is incorrect because, although a 17-year-old can enter into a contract, the law does not grant minors the right to surrender, mortgage, or assign a policy; these rights only become available at the age of 18. Statement III is incorrect because a minor cannot provide a valid legal discharge for policy proceeds, meaning they cannot legally sign for or receive policy payouts until they reach the full legal age of 18.

Takeaway: While individuals aged 16 and 17 can purchase life insurance policies on their own, they are legally restricted from performing major policy transactions or receiving payouts until they reach the age of 18. Therefore, statements I and IV are correct.

Correct: Statement I is correct because the Accidental Death Benefit Rider is designed to pay an additional amount over the base sum assured if the death is caused by an accident as defined by the insurer. Statement III is correct because Hospital Cash Benefit Riders typically provide a fixed daily payment for hospital stays resulting from both sickness and accidents, provided they are not excluded.

Incorrect: Statement II is incorrect because the Accidental Death and Dismemberment Rider includes protection for disablement and dismemberment in addition to the death benefit, rather than excluding it. Statement IV is incorrect because the payout for hospital cash benefits is subject to a list of exclusions set by the insurer and is not automatically paid for every possible cause of confinement.

Takeaway: Supplementary riders provide specific additional coverage beyond the basic policy, but eligibility for benefits depends on meeting the insurer’s definitions and not falling under policy exclusions. Therefore, statements I and III are correct.

Correct: Statement II is correct because premature death involves a breadwinner passing away while still having financial duties like supporting family or paying a mortgage. Statement III is correct because longevity risk refers to the danger of having inadequate funds during retirement due to living longer than expected. Statement IV is correct because health risks include both the direct costs of medical treatment and the indirect loss of income from being unable to work.

Incorrect: Statement I is incorrect because self-insurance involves an individual or firm keeping the risk and paying for losses out of their own income or savings, rather than paying a fee to transfer that responsibility to an insurance company.

Takeaway: Life insurance products are designed to mitigate specific personal risks like premature death, longevity, and health-related income loss through risk transfer mechanisms. Therefore, statements II, III and IV are correct.

Correct: Statement I is correct because participating funds pool assets together to manage returns collectively for all policy owners, unlike investment-linked policies where assets are held as individual units. Statement III is correct because once a reversionary bonus is declared and added to the policy, it becomes a guaranteed benefit that the insurer cannot later reduce or take away.

Incorrect: Statement II is incorrect because the primary purpose of smoothing is to ensure that bonuses do NOT necessarily follow the immediate rises and falls of the investment market, providing stability instead. Statement IV is incorrect because policies with higher guaranteed benefits require a more conservative investment mandate, such as government bonds, to ensure the insurer can meet those fixed obligations.

Takeaway: Participating policies manage volatility through the pooling of assets and the smoothing of bonuses, with the investment strategy directly influenced by the level of guarantees provided to the policy owner. Therefore, statements I and III are correct.

Correct: Statement I is correct because a contract is voidable at the option of an intoxicated person if the other party knew or ought to have known about their condition, though the person can choose to validate it once sober. Statement III is correct because the law requires both an objective test (the prudent insurer’s perspective on materiality) and a subjective test (actual inducement of the specific insurer) to justify avoiding a contract for non-disclosure.

Incorrect: Statement II is incorrect because life insurance follows the principle of utmost good faith (uberrima fides), not “buyer beware” (caveat emptor); the proposer must voluntarily disclose material facts even if no specific question is asked. Statement IV is incorrect because while most assets of a bankrupt person vest with the Official Assignee, specific exceptions exist for policies issued under certain legal provisions, such as Section 49L of the Insurance Act.

Takeaway: Insurance contracts rely on the principle of utmost good faith and specific legal capacities, requiring full disclosure of material facts that would influence a prudent insurer’s decision. Therefore, statements I and III are correct.

Correct: Terminal bonuses are intended to adjust the final payout to reflect the actual performance of the life fund more closely, which leads to higher volatility compared to the steadier reversionary bonuses.

Incorrect: The statement about terminal bonuses being added to policies in force is wrong because they are only applied upon termination events like death, maturity, or surrender. The claim that they are paid regardless of duration is incorrect as insurers often require a minimum period, such as 25 years, before a policy becomes eligible for this bonus. The assertion that they must be a fixed dollar amount is false because they can also be declared as a percentage of the basic sum assured or as a percentage of existing reversionary bonuses.

Takeaway: While reversionary bonuses provide steady growth during the policy term, terminal bonuses serve as a final, more volatile adjustment to ensure fairness at the point of termination.

Correct: Statement II is correct because the total benefit payable upon the surrender of a participating policy is the sum of the guaranteed surrender value and the surrender value of any bonuses that have been credited to the policy. Statement III is correct because insurers often include specific clauses that allow them to reduce surrender values during periods of extreme market volatility to ensure that exiting policyholders do not receive an unfair share of the fund’s assets at the expense of remaining members.

Incorrect: Statement I is incorrect because participating policies that are terminated early in the year, before the formal annual bonus declaration in March or April, are typically eligible for an interim bonus based on prevailing rates or interim reports. Statement IV is incorrect because the legal vesting of bonuses (where they attach legally to the policy) typically occurs only on the policy anniversary for which the bonus is due and after the required premiums have been paid, rather than immediately upon board approval.

Takeaway: Participating policy values are composed of guaranteed and bonus components, with mechanisms like interim bonuses and market-value adjustments ensuring equitable treatment of all policyholders during different economic conditions. Therefore, statements II and III are correct.