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

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

Answer: (C)

Dividends from a participating life policy can be allocated in several ways that affect the policy’s value and death benefit. The options typically include leaving the dividends to accumulate with-interest, using them to purchase paid-up additions, or using them to buy one-year term insurance. These choices let the policyowner grow cash value or increase death benefit without paying extra premium.

The option to accumulate dividends without interest isn’t a valid choice because when you leave dividends to accumulate, they are expected to earn some return — they are credited with interest by the insurer. Paying no interest contradicts the idea of accumulating funds over time, so it isn’t offered as a valid dividend option.