dividends

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash option

investment experience

invested premiums earn a higher return that was assumed

reduction of premium

The insurer uses the dividend to reduce the next year's premium

The paid-up addition option uses the dividend

To purchase a smaller amount of the same type of insurance as the original policy.

Paid-Up Additions

Additional single-premium Life insurance paid for by policy dividends and added to the face amount.

one year term

The insurance company uses the dividend to purchase additional insurance in the form of one-year term insurance that increases the overall policy death benefit.

Dividend Options

cash payment reduction or premium accumulation at interest one year term paid up additions paid up insurance

insurance companies cannot guarantee

dividends

mortality

fewer insured's die than were actuarially projected, so fewer death claims were paid

L&D insurance earned a higher return on their invested premiums than the expected to. they will use money to pay dividends on life insurance policies. this is called?

investment experience

Policy Dividends source

mortality investment experience operating expenses (loading)

an insured has a life insurance policy from a participating company and it received quarterly dividends. he has instructed the company to apply the policy dividends to increase the death benefit. the dividend option that the insured has chosen is called

paid up additions

dividends

return of higher premiums (not taxable)

interest earned on policy dividend

taxable

operating expenses (loading)

the cost of operating the company was less than assumed

cash payment

The insurer simply sends the policy owner a check for the amount of the dividend as it is declared usually annually.

accumulation at interest

the insurance company keeps the dividend in an account where it accumulates interest. the policyowner is allowed to withdrawal the dividends at any time. the amount of interest is specified in the policy and compounds annually. although the dividends themselves are not taxable, the interest on the dividends are taxable to the policyowner when credited to the policy, whether or not the policyowner receives the interest.