Participating policies afford the policyowner the opportunity to participate in the earnings of the insurance company through these dividend payments

Dividend Options

If a life insurance contract is a participating policy that means that the policyowner is entitled to an annual dividend paid by the insurance company.

Cash Payment

Under this dividend option the insurance company sends the insured a check equal to the amount of the declared dividend payment.

Reduction of Premium

The premium due on the policy for the upcoming year will be reduced by the amount of the current years declared dividend and the balance becomes the new premium due for the upcoming year.

Accumulation of Interest

The dividend may be held by the insurance company to accumulate interest paid at the rate that is specified in the contract. The insured has the right to withdraw the accumulated dividends at any time.

Should the accumulated interest and dividend be on deposit with the company at the time of the insureds death, the accumulated interest and dividend will be paid along with the policy proceeds.

Paid-Up Additions

This option enables the insured to receive additional amounts of life insurance by using the dividend to purchase paid-up additions. The additional insurance will be the same kind and subject to the same provisions as the original policy.

One-Year Term

The amount of the one-year term coverage would be added to the face amount of the base policy in the event of the insureds death.

Life Insurance Policy Riders

Most insurance agents are familiar with the term endorsement. However in life and health insurance policies the word rider is used in lieu of the word endorsement.

The effect is the same in that riders modify the coverage of the basic policy the same as an endorsement would.

Waiver of Premium

The waiting period is usually six months, and if the insured continues to be disabled after the six-month waiting period, the premium payments on the policy will be waived by the insurance company. Many policies will also refund the premium that was paid by the insured during the six-month waiting period.

The cost for this coverage is a bargain to the insured, and no policy should be sold without this rider.

Accidental Death and Dismemberment

The amount paid in the event of accidental death of the insured is usually twice the policys regular face amount. This benefit is often referred to as double indemnity.

As a rule the accidental death rider is very carefully worded to define exactly under what circumstances this benefit will be paid.

The most liberal of the definitions is accidental bodily injury. The less favorable wording would be that death must occur by accidental means.

For example, with the language by accidental means, if an insured died from a broken neck after intentionally diving into the shallow end of a swimming pool the policy would not pay the accidental death benefit because the action of diving into this pool wasnt accidental. However, if the insured accidentally fell into the pool and drowned the benefit would be paid.

On the other hand, under the accidental bodily injury definition, even the intentional diving into the pool would have been paid because the broken neck was an accidental injury notwithstanding the intentional dive into the shallow water.

Normally the death caused by the accident must consummate itself within ninety to one hundred eighty days of the incident in order for the double indemnity benefit to be paid under the rider.

While the accidental death benefit is paid to the beneficiary after the death of the insured, the dismemberment portion of the rider provides that the dismemberment benefit will be paid directly to the insured, rather than the beneficiary.

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