Utah Life Producer Practice Exam

What type of insurance policy allows for a dividend paid in cash?

1. Universal life insurance

2. Whole life insurance

3. Term life insurance

4. Variable life insurance

The correct answer is: Whole life insurance

Whole life insurance is the type of insurance policy that allows for a dividend paid in cash. This type of policy is designed to provide lifelong coverage and build cash value over time. The dividends paid to policyholders are a portion of the insurer's profits, which are then distributed to policyholders as a return on the premiums they have paid. In the case of whole life insurance, the policy is often participating, meaning that it is eligible to receive dividends based on the company's performance. Policyholders can choose to receive these dividends in cash, reinvest them to purchase additional coverage, reduce their premium payments, or use them to add to the policy's cash value. The other types of policies listed do not typically offer dividends in cash. Universal life insurance, for example, provides greater flexibility in premium payments and death benefits but does not provide dividends. Term life insurance, primarily focused on offering a death benefit for a specified time period, does not accumulate cash value or offer dividends. Variable life insurance allows for investment options and cash value accumulation but also does not typically issue dividends as it operates differently from the participating whole life policies.