Question

A whole life policy that provides a choice of dividend options must include which of the following statements about dividends?

1) Dividends are guaranteed and will be paid out annually
2) Dividends are not guaranteed and will vary based on the company's performance
3) Dividends can only be used to purchase additional insurance coverage
4) Dividends can be taken as cash or used to reduce premium payments

Answer 1

Dividends in a whole life policy are not guaranteed and vary based on the company's performance. Policyholders have the option to take the dividends as cash or use them to reduce premium payments.

Step-by-step explanation:

When it comes to a whole life policy that provides a choice of dividend options, it is important to understand the statements about dividends. Dividends are not guaranteed and will vary based on the company's performance. This means that the company may choose to pay dividends to policyholders, but it is not an obligation and the amount may fluctuate depending on how the company is doing. Furthermore, policyholders have the option to take the dividends as cash or use them to reduce premium payments. They are not limited to purchasing additional insurance coverage with the dividends.