CARD Q046
Which statement about dividends on a participating life policy is correct?
- They represent the policyowner’s share of stockholder dividends
- They are not guaranteed
- They are guaranteed once the first dividend is paid
- They equal the interest credited to every cash-value policy
They are not guaranteed
Dividends depend on the insurer’s experience and declaration. Available options may include cash, premium reduction, accumulation, or paid-up additions.
Why each choice is right or wrong
A. They represent the policyowner’s share of stockholder dividends
Incorrect. Policy dividends are not automatically stockholder dividends; the contractual participation mechanism is different.
B. They are not guaranteed
Correct. Dividends depend on the insurer’s experience and declaration. Available options may include cash, premium reduction, accumulation, or paid-up additions.
C. They are guaranteed once the first dividend is paid
Incorrect. A first dividend does not guarantee later dividends.
D. They equal the interest credited to every cash-value policy
Incorrect. Dividend eligibility is distinct from interest crediting on every cash-value policy.
Review the related terms
Use these lessons to revisit the concepts and try additional practice questions.