Which of the following is a dividend option available in life insurance policies?

The correct answer highlights several common dividend options available in life insurance policies. The options listed—reduced premium, paid-up option, and cash—are all recognized alternatives that policyholders can choose if dividends are declared by their life insurance company.

Under the reduced premium option, the dividends can be used to reduce the amount of future premium payments. This can be a convenient way for policyholders to manage their cash flow while maintaining their life insurance coverage.

The paid-up option allows policyholders to use dividends to purchase additional paid-up insurance, which increases the total coverage amount without requiring further premium payments. This effectively enhances the policy’s value over time.

Choosing to receive dividends in cash is straightforward; the policyholder simply receives the dividend as a cash payment, which they can use or invest as they see fit.

The other options, while they may sound viable, do not accurately reflect common dividend options in life insurance. For instance, options like fixed period and life income more commonly relate to settlement options rather than dividend options. Similarly, stock options and accumulation at interest may be features of certain policies or financial products, but they do not directly pertain to the declared dividends of life insurance policies. This understanding is crucial for anyone studying life insurance practices, as it