Question

All of these are valid policy dividend options for a life insurance policyowner EXCEPT: Option 1: Cash payment Option 2: Premium reduction Option 3: Accumulation at interest Option 4: Premium increase

Answer 1

Dividends from a life insurance policy can be used for a cash payment, to reduce premiums, or to accumulate at interest, but not for a premium increase. Option 4: Premium increase is not a valid option.

Step-by-step explanation:

All of the following are valid policy dividend options for a life insurance policyowner EXCEPT: Option 4: Premium increase. When a life insurance policy declares dividends, they can be used in several ways. Option 1: A Cash payment can be taken by the policyholder.

Option 2: The dividend can be applied to reduce ongoing Premium reduction, lowering the out-of-pocket cost for the insured. Option 3: Accumulation at interest allows the dividends to be left with the insurer to accumulate at a specified interest rate.

However, Option 4: Premium increase is not a valid option as dividends are a return of excess premiums and are not used to increase the premium payments.

Answer 2

The correct answer is Option 4: Premium increase. All of the other options are valid policy dividend options for a life insurance policy owner.

Step-by-step explanation:

The correct answer is Option 4: Premium increase.

All of the other options are valid policy dividend options for a life insurance policy owner. Option 1: Cash payment allows the policy owner to receive a lump sum of money. Option 2: Premium reduction reduces the amount the policy owner has to pay for the insurance premiums. Option 3: Accumulation at interest allows the policy owner to accumulate their policy dividends and earn interest on them over time.