Which of the following is not a valid policy dividend option for a life insurance policy owner?

• A. Accumulate without interest
• B. Accumulate with interest
• C. Paid-up additions
• D. One-year term insurance

Answer: (A)

Dividends from a life insurance policy are ways to take the policy’s extra value, either by making the money grow or by applying it toward more coverage or lower costs. The standard options include letting the dividends accumulate at interest with the insurer, using them to purchase paid-up additions that boost both the death benefit and cash value, using them to buy one-year term insurance for extra coverage, or applying them to reduce the policy’s premium.

The option to accumulate without interest isn’t valid because the whole purpose of allowing dividends to be held is to have them earn something or be put to work within the policy. When dividends are accumulated, they’re typically credited with interest or used to increase the policy’s value or coverage. Leaving them as non-interest-bearing funds isn’t offered, so it isn’t a legitimate dividend option.