Final answer:
The true statement regarding policy dividends is that the insured selects a dividend option at the time of policy purchase. Dividends are neither guaranteed nor always taxable, and they are issued by participating policies. Hence, the correct answer is option (D).
Step-by-step explanation:
The statement that is true regarding policy dividends is that a dividend option is selected by the insured at the time of policy purchase. It is important to note that dividends are not always guaranteed; they depend on the performance of the insurance company and are typically paid out by participating policies, which share profits with policyholders. Additionally, dividends are not always taxable.
If the dividends do not exceed the sum of premiums paid, they are generally considered a return of premium and are not taxable. However, if dividends accumulate interest, that interest may be taxable.