How does a policyholder receive cash dividends from a participating policy?

How does a policyholder receive cash dividends from a participating policy?

• A. They are credited to the policyholder's account for future withdrawals
• B. A check is sent directly to the policyholder
• C. They must be reinvested into other insurance products
• D. They can only be used to pay future premiums

Answer: (B)

A policyholder receives cash dividends from a participating policy through the issuance of a check that is sent directly to them. Participating policies are issued by mutual insurance companies and allow policyholders to share in the company's profits through dividends. When the insurer performs well, such as achieving lower claims than anticipated or earning greater investment returns, it may declare dividends. These dividends can be taken as cash, which provides policyholders with liquidity and financial flexibility. This method of receiving dividends, as cash directly to the policyholder, allows them to use the funds as they see fit, whether to invest elsewhere, cover personal expenses, or save for the future. While other options for dividends exist, such as applying them to premium payments or reinvesting them, the direct cash payment provides immediate benefit and control to the policyholder.

A policyholder receives cash dividends from a participating policy through the issuance of a check that is sent directly to them. Participating policies are issued by mutual insurance companies and allow policyholders to share in the company's profits through dividends. When the insurer performs well, such as achieving lower claims than anticipated or earning greater investment returns, it may declare dividends. These dividends can be taken as cash, which provides policyholders with liquidity and financial flexibility.

This method of receiving dividends, as cash directly to the policyholder, allows them to use the funds as they see fit, whether to invest elsewhere, cover personal expenses, or save for the future. While other options for dividends exist, such as applying them to premium payments or reinvesting them, the direct cash payment provides immediate benefit and control to the policyholder.