Insurance Exam Practice

The fifth dividend option, sometimes called the one-year term option, uses the dividend to:

Life Insurance practice question · 2 posts · last activity Oct 3, 2026

  1. A.Buy single-premium paid-up additions that increase the policy's face amount permanently
  2. B.Prepay the next annual premium, with any excess held at interest for one year
  3. C.Pay up the policy one year sooner than the original premium schedule provides
  4. D.Buy one-year term insurance, often in an amount related to the policy's cash value Correct answer

Explanation

The one-year term dividend option applies the dividend as a single premium for term coverage lasting one year, commonly limited to an amount tied to the policy's cash value. It does not prepay a future premium, which would simply be the premium reduction option, and it does not buy paid-up additions or shorten the premium-paying period; those are separate dividend options.

What learners picked (769 answers):
A: 21%B: 9%C: 8%D: 62%

Discussion (2)

BrenQuestion

Does a dividend pay the insured or does it stay in the policy

Insurance Exam PracticeStaff

Both are possible, and the policyowner chooses. A dividend belongs to the owner. It can be paid in cash, used to reduce the next premium, left with the insurer to accumulate at interest, used to buy paid-up additions, or, under the fifth option this question tests, used to buy one-year term insurance. The dividend only "stays in the policy" when the owner picks accumulate at interest or paid-up additions. Dividends are not guaranteed, and they are paid on participating policies only.

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