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