Final answer:
Dividends from participating life insurance policies are not taxable, are often paid annually, and represent a return of overcharged premiums; thus, all of the statements are true.
Step-by-step explanation:
Life insurance policies that pay dividends are known as participating policies. These dividends are a portion of the insurer's surplus, distributed to the policyholders. Dividends are generally not taxable because they are considered a return of a portion of the premium paid by the policyholder, and not income.
Additionally, dividends are usually paid on an annual basis and can be seen as a return of overcharged premiums if the insurance company's experience is better than expected in terms of investment earnings, expenses, and mortality rates. Therefore, the correct statement about dividends from participating policies is that d. All of the above.
Participating policies in life insurance refer to policies that pay dividends to policyholders. Dividends are a portion of the profits that insurance companies distribute to policyholders who hold these policies.
Regarding the given options, the true statement about dividends is that they are actually a return of overcharged premiums. Dividends reflect the excess premiums paid by the policyholders which are then returned to them in the form of dividends. Dividends are not taxable. They are usually paid on an annual basis, but the frequency may vary depending on the policy and the insurance company.