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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