All of the following are valid policy dividend options for a life insurance policyowner EXCEPT

• A. cash payments
• B. paid-up additions
• C. one-year term insurance
• D. accumulate without interest

Answer: (D)

Dividends from participating policies can be used in several established ways: you can take them as cash, use them to purchase paid-up additions that boost both cash value and death benefit, use them to buy a one-year term insurance rider, or have them accumulate with interest with the insurer. The option to accumulate without interest isn’t a standard dividend option, because there’s no mechanism where dividends are left with the insurer and earn no interest. In other words, when you leave dividends with the insurer, they’re typically credited with interest or used in one of the other valid options. The other three choices—cash, paid-up additions, and one-year term—are valid ways to apply dividends, while accumulating without interest is not.