Question

Which life insurance dividend option does not increase a policy's cash value?

a. Cash payment
b. Accumulate at Interest
c. Paid-up insurance
d. Paid-up additions

Answer 1

The cash payment life insurance dividend option does not increase a policy's cash value as it is paid out directly to the policyholder.

Step-by-step explanation:

The life insurance dividend option that does not increase a policy's cash value is the cash payment. When a policyholder selects the cash payment option, they receive the dividends as a direct cash payment, which they can use for any purpose outside the policy. This does not add to the policy's cash value, which is the accumulated amount that serves as an account for the policyholder's use. The other options, such as accumulated at interest, paid-up insurance, and paid-up additions, all allow the dividends to contribute to the policy's cash value in different ways.