Dividend
A refund of excess premium from a mutual insurer's favorable mortality, expense, and investment experience, not taxable as income because it returns premium.
Drill all 803 terms as flip-card flashcards in the Exam Engine →
Practice This Concept
A policyowner of a participating whole life policy instructs the insurer to keep the annual dividends with the company so they can earn interest and grow the policy's value. This dividend option is called:
Accumulation at interest — The accumulation-at-interest dividend option leaves dividends on deposit with the insurer, where they earn interest (taxable when credited) and become part of the policy's value. It differs from cash, which is paid out directly; paid-up additions, which buy small amounts of paid-up whole life; and reduced premiums, which apply the dividend toward the next premium.
National insurance concept
The participating policy dividend option that uses dividends to purchase additional paid-up whole life insurance is called:
Paid-up additions — The paid-up additions option uses each dividend to buy small amounts of fully paid-up whole life insurance, thereby increasing both the death benefit and the cash value without requiring evidence of insurability. It is one of the standard dividend options, along with cash, accumulation at interest, reduced premium, and one-year term. The purchased additions are paid up and cannot lapse, so they add permanent value to the policy. This option is popular with clients who want their coverage to grow over time using the policy's dividends. The additions also earn future dividends themselves.
National insurance concept
- Life InsuranceA policyowner of a participating whole life policy instructs the insurer to keep the an…
- Life InsuranceThe participating policy dividend option that uses dividends to purchase additional pai…
- Life InsuranceUnder the one-year term dividend option, the policy dividend is used to:
- Life InsuranceWhich of the following is a standard dividend option available under a participating li…
- Life InsuranceWhich type of insurer is generally associated with issuing nonparticipating life insura…
- Life InsuranceUnder the paid-up additions dividend option on a participating whole life policy, polic…
Practice all life insurance questions →