New York State Life Insurance Exam Questions Practice Question
In which of the following dividend options would an insurer invest the policyowners money and add interest earnings to the initial amount of the dividends as such earnings accrue?
Correct Answer: A
Rationale: The Accumulation at Interest Option allows the insurer to invest policyowners' dividends, generating interest on the accumulated amount over time. This option effectively grows the initial dividend amount, providing policyowners with increased value.
The Paid-up Additions Option uses dividends to purchase additional insurance coverage, which does not involve investment or interest accumulation. The Cash Dividend Option pays out dividends directly to policyowners, providing immediate cash without any investment growth. The Reduced Premium Dividend Option applies dividends to lower future premium payments, rather than investing them for interest earnings.
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