Primerica Life Producer Practice Test

If a policyholder accumulates dividends with interest, what can these be used for?

1. To pay off policy premiums

2. To purchase additional insurance

3. To reduce the premium cost

4. To pay the policy up early

The correct answer is: To pay the policy up early

When a policyholder accumulates dividends with interest, these funds can serve several purposes related to the insurance policy. One of the primary uses is to pay off policy premiums. This enables policyholders to utilize the dividends they receive to cover their premium payments, thus alleviating some of the financial burden associated with maintaining the policy. Additionally, dividends can also be used to purchase paid-up additions, which are additional coverage without requiring further premiums, and can serve to reduce the net premium cost. The option about paying the policy up early is not the most accurate use of accumulated dividends. While dividends can contribute to a policy's value or help manage premium payments, early policy payment would typically involve the policy's cash value rather than the specific use of dividends.