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

When an insured receives an annual dividend check from their life insurance policy, this arrangement is referred to as the cash option. This refers specifically to a choice that an insurance policyholder has regarding how dividends are managed. The cash option allows the policyholder to receive the dividends in cash, which they can use as they wish, rather than having those dividends applied to the premiums, left to accumulate interest, or used to purchase additional insurance coverage.

By selecting the cash option, the insured receives tangible financial benefits directly, which can be particularly valuable for personal use or investment. Understanding this method of dividend distribution is essential for both policyholders and agents, as it provides clarity on the benefits of participating in a life insurance policy and how financial dividends can positively impact the policyholder's overall economic situation.