Which of the following statements regarding a life insurance policy dividend is TRUE?

A. It represents a refund of overcharged premium in a non-participating whole life policy.
B. It represents the build-up of cash value in a permanent insurance policy.
C. It is the distribution of excess funds accumulated by the insurer on participating policies.
D. It is a stockholder's return on his investment in the company.



Answer :

Final answer:

A life insurance policy dividend represents the distribution of excess funds to shareholders, cash-value life insurance provides a savings component, and dividends are payments from a corporation's earnings to stockholders.


Explanation:

A life insurance policy dividend represents the distribution of excess funds accumulated by the insurer on participating policies. It is a payment made from after-tax profits to company shareholders, providing a return on their investment in the company.

Cash-value life insurance accumulates savings that can be withdrawn, representing a form of savings account with a death benefit. This cash value builds up over time and can be accessed by the policyholder.

Dividends are disbursements of a portion of a corporation's net earnings to stockholders, offering them a share of the company's profits.


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