Utah Life Producer Practice Exam

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

1. Loan option

2. Cash option

3. Reinvestment option

4. Premium offset

The correct answer is: Cash option

The arrangement where an insured receives an annual life insurance dividend check is best described by the term "cash option." This is because the cash option allows policyholders to receive their dividends in cash, which they can use as they see fit. This is a common choice for many policyholders who prefer to have immediate access to their dividends rather than applying them to their policy or reinvesting them. The cash option provides flexibility, as the insured can decide whether to spend that money for personal use, invest it elsewhere, or save it for future needs. The payment of dividends in cash is a straightforward process and reflects the company's performance and profitability, allowing the policyholder to benefit directly from the financial successes of the insurance provider.