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Dividend Option


Definition of "Dividend option"

Methods of handling policyholder dividends. In a participating life insurance policy, dividends are paid to the policy owner according to which of the following options is selected:

  1. applied to reduce premiums;
  2. paid in cash;
  3. purchase increments of paid-up life insurance;
  4. left on deposit with the insurance company to accumulate at interest;
  5. purchase extended term life insurance for one year in the amount a dividend can buy (Fifth Dividend Option). Some health and property insurance policies have dividend options.



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