State RegulationsVA specificDifficulty 2/5
A policyholder with a Virginia participating whole life policy asks her producer about her dividend options. Which response is accurate?
Select an option to reveal the answer and the full 3-part explanation — free, no signup.
Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Under Va. Code § 38.2-3307, dividends on a participating Virginia policy are paid to the policyholder as provided in the policy, and participating policies customarily offer the classic menu: cash, premium reduction, accumulation at interest, and paid-up additional insurance. The policyholder elects among these options, and the insurer applies the dividends accordingly. Knowing the menu matters because each option produces a different effect on cash value and the death benefit.
Why the other options are wrong
- B) Cash is only one of several dividend applications; the policy's options under Va. Code § 38.2-3307 include premium reduction, accumulation, and paid-up additions.
- C) There is no restriction confining dividends to term insurance on a different insured; the standard options run to the policyholder's own policy.
- D) Dividend payment has nothing to do with policy loans; Va. Code § 38.2-3307 requires dividends to be paid as the policy provides, without any loan trigger.
Memory hook
The dividend menu: cash, cut premiums, compound at interest, buy paid-up additions.