Which statement about dividends is true in the Accumulate at Interest concept?

Which statement about dividends is true in the Accumulate at Interest concept?

• A. Dividends are paid out to the policyowner each year as cash.
• B. Dividends are retained by the insurer and the interest on dividends is compounded annually.
• C. Dividends are taxed as ordinary income.
• D. Dividends are not paid.

Answer: (B)

When a policy uses accumulate at interest, the dividends aren’t paid out as cash. Instead, the insurer keeps the dividends and credits interest on that amount, with the interest compounded annually. This means the dividend funds grow inside the policy, increasing the cash value over time and leaving you the option to withdraw or borrow later. This description matches the accumulate at interest feature precisely, whereas paying dividends in cash, taxing the dividends, or not paying dividends would describe different scenarios.

When a policy uses accumulate at interest, the dividends aren’t paid out as cash. Instead, the insurer keeps the dividends and credits interest on that amount, with the interest compounded annually. This means the dividend funds grow inside the policy, increasing the cash value over time and leaving you the option to withdraw or borrow later. This description matches the accumulate at interest feature precisely, whereas paying dividends in cash, taxing the dividends, or not paying dividends would describe different scenarios.