Question 10

Cash dividend option.

The cash dividend option refers to the choice where the insurer pays the policyowner a check for the dividend amount. This allows the policyholder to receive the dividend in cash rather than applying it towards the policy.

A) Reduced premium dividend option.

This option involves using the dividend to reduce the premium amount due on the policy rather than receiving it as cash. Therefore, it does not align with the definition of the cash dividend option, making it an incorrect choice.

B) Cash dividend option.

This is the correct choice as it directly describes the scenario where the insurer issues a check to the policyowner for the dividend amount. It allows the policyholder to utilize the dividend as they see fit, confirming its accuracy.

C) One-year dividend option.

The one-year dividend option typically refers to dividends that are applied towards the next year's premium rather than being paid out as cash. This option does not fulfill the criteria of receiving a check, making it incorrect.

D) Paid-up option.

The paid-up option allows dividends to purchase additional paid-up insurance, thus increasing the policy's value but does not involve receiving a cash payment. This disqualifies it from being the correct answer.

Conclusion

The cash dividend option is the only choice that accurately describes the process of receiving a check for the dividend amount. All other options involve applying dividends towards premiums or increasing policy value, which does not meet the criteria of cash payment. Hence, option B is definitively correct.