Question

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?

A Paid-up additions
B Dividend Accumulation option
C Paid-up option
D Accumulation at Interest

Answer 1

The Dividend Accumulation option allows the insurer to accumulate dividends at interest and pay off the policy early.

Step-by-step explanation:

The option that is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early is Dividend Accumulation option.

In cash-value (whole) life insurance, the policyholder receives dividends based on the company's financial performance. Instead of receiving the dividends in cash, the policyholder can choose to accumulate them at interest within the policy.

By accumulating the dividends, plus interest, and using the policy cash value, the policyholder can pay off the policy early and have it become a paid-up policy.