Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

12. Stockholders' Equity

Dividends and Dividend Preferences

Financial Accounting

12. Stockholders' Equity

Dividends and Dividend Preferences

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Multiple Choice

Which dividend option will increase the death benefit of a participating life insurance policy?

Taking the dividend as cash

Leaving the dividend to accumulate at interest

Applying the dividend to reduce premiums

Purchasing paid-up additional insurance

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Verified step by step guidance

Understand the concept of a participating life insurance policy: This type of policy allows policyholders to receive dividends, which are a share of the insurer's profits. These dividends can be used in various ways, depending on the policyholder's choice.

Review the dividend options provided: The options include taking the dividend as cash, leaving the dividend to accumulate at interest, applying the dividend to reduce premiums, and purchasing paid-up additional insurance.

Analyze the impact of each option on the death benefit: Taking the dividend as cash or leaving it to accumulate at interest does not directly increase the death benefit. Applying the dividend to reduce premiums lowers the cost of the policy but does not increase the death benefit either.

Understand the concept of paid-up additional insurance: This option uses the dividend to purchase additional insurance coverage, which increases the policy's death benefit. These paid-up additions are permanent and do not require future premiums.

Conclude that purchasing paid-up additional insurance is the option that increases the death benefit of a participating life insurance policy, as it directly adds to the coverage amount.