Life Insurance Dividend Options
Reduction of premium
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's' premium, thus reducing it to $900. What option does this describe?
Cash Option
An insured receives an annual life insurance dividend check.
Accumulated with interest
Dividend stays with insurance company in GIC. Interest earned is TAXABLE interest. Dividends are added to DB or cash surrender value
Purchase of Paid-up Additions
Dividend used to purchase small amount of whole life insurance. This amount is added to policy face value to calculate DB. CV of paid up purchases + guaranteed CV of policy= surrender value
One-year Term (5th dividend option)
the dividend is used to buy one-year term insurance equal to base cash value
