Final answer:
The dividend option that provides additional permanent coverage is paid-up additions. This option contributes to the growth of the life insurance policy's death benefit and cash value, supporting long-term financial planning for old age.
Step-by-step explanation:
The dividend option that provides additional permanent coverage is paid-up additions. When dividends are used to purchase paid-up additions, they buy extra coverage that increases the death benefit and cash value of the policy. This option is advantageous for those saving for old age because it allows the life insurance policy to grow over time. Unlike temporary coverage like a one-year term, which only lasts for a set period, or interest-earning strategies such as accumulate at interest or receiving cash payments, paid-up additions are a private market option that provides lasting benefits.
Individuals planning for retirement need to consider different strategies to ensure they have enough income to support themselves in their later years. Paid-up additions in a life insurance policy can be part of a diversified approach to retirement savings, along with investments in stocks, bonds, savings accounts, and annuities. These options all carry varying degrees of risk and potential return, allowing individuals to choose the best fit for their financial goals and risk tolerance.