Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?

Which dividend option would an insurer invest the policyowner's money and add any interest earnings as the dividends accrue?

• A. Cash option
• B. Dividend option
• C. Accumulation of interest option
• D. Paid-up additions

Answer: (C)

Dividends from a participating policy can be held with the insurer to earn interest. The option that matches this idea is the accumulation-at-interest option. Here, the insurer invests the policyowner’s dividend funds and credits interest as those dividends accrue. The accumulated amount stays in the policy’s dividend account and can be withdrawn later or applied to future premiums, increasing the policy’s value over time. This differs from taking dividends in cash or using them to buy additional paid-up insurance, which provide immediate cash or increase the death benefit, but not by accumulating interest within the dividend account.

Dividends from a participating policy can be held with the insurer to earn interest. The option that matches this idea is the accumulation-at-interest option. Here, the insurer invests the policyowner’s dividend funds and credits interest as those dividends accrue. The accumulated amount stays in the policy’s dividend account and can be withdrawn later or applied to future premiums, increasing the policy’s value over time. This differs from taking dividends in cash or using them to buy additional paid-up insurance, which provide immediate cash or increase the death benefit, but not by accumulating interest within the dividend account.