Dividend Options Found in Adjustable Life Insurance Policies

Adjustable Life (AL) policies offer the conventional dividend options—cash, premium reduction, accumulate at interest, and paid-up additions. Some AL policies offer what is called a policy improvement dividend option. With this option, dividends become a part of the cash value and thereafter lose their separate identity. If the current plan of insurance is equivalent to some form of whole life insurance, this option causes the face amount to increase without an increase in premiums or without changing the premium paying period. The effect is essentially the same as buying paid-up additions, except that the policyowner cannot later surrender these amounts without surrendering the policy as a whole. Generally, policyowners of traditional whole-life policies may surrender regular paid-up additions separately. If the current plan of insurance is of a term nature, this option will increase the term of coverage.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

Leave a Comment