Question

A life insurance policyowner would like a dividend option that results in a limited current outlay of funds. Which divident option would be chosen

Answer 1

Reduction of premium payment would be chosen.

This enables the policyholder to deduct policy dividends from the premium for the next year. Consequently, it will be simpler for the policyholder to pay her subsequent premium.

What is a dividend?

A dividend is a cash paid to you by your life insurance provider. This typically signifies that you have a participating policy contract, commonly known as a whole life insurance policy that pays dividends. You receive dividend payments from that company when it is profitable, rewarding your investment. You have the option of receiving this money through dividend options.

Converting Your Dividend Into Premium

This dividend option for life insurance is quite simple. If selected, your insurance provider will just use your payout to cover all or a portion of your yearly payment. If you select this option and your dividend is greater than your premium, you might also need to select a secondary alternative. On the other hand, you will need to make the remaining payments as usual if your dividend is less than your premium.

You must begin paying your premium on an annual basis if you decide to use your payout toward it. For instance, you would still need to pay the remaining $6,500 all at once if your annual premium was $8,000 and your dividend was $1,500. You may pay more or less of your premium each year depending on how the dividends change over time.

Learn more about reduction of premium here:

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