With regards to the differences between a life insurance policy which is "exempt" compared with a policy that is "non-exempt", which of the following statements is/are true?

1. A non-exempt policy is designed primarily to provide life insurance protection whereas an exempt policy is designed primarily as an investment. 2. An exempt policy is subject to any income tax consequences only at the time of disposition. 3. A non-exempt policy is subject to annual taxation on an accrual basis.

A.

1, 2 and 3 only.

B.

1 only.

C.

3 only.

D.

2 and 3 only.