Dividend
A portion of the insurance company's surplus earnings that may be paid to policyholders of participating life insurance policies (typically whole life policies). Dividends are not guaranteed.
Detailed Explanation
Policyholders often have several options for their dividends: they can take them in cash, apply them to lower premiums, invest in extra coverage, or let them grow with interest.
Practical Example
John has a participating whole life insurance policy that pays dividends annually. He chooses to use his dividends to purchase additional paid-up insurance, gradually increasing his policy's death benefit.
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