Life Policy ProvisionsQuestion 569 of 716
Policy dividends from a participating life policy are generally not taxable because they are treated as:
a.A return of overpaid premium
b.A portion of the death benefit paid early
c.A capital gain on invested premiums
d.Interest earned on the cash value
Explanation
Dividends are considered a refund of premium the policyowner overpaid, so they are not taxable income (though interest left to accumulate on them is). They are not capital gains, interest, or an early death benefit.
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Related questions on this topic
- The reduced paid-up nonforfeiture option provides:
- The automatic premium loan provision prevents a policy from lapsing by:
- When a policyowner requests a cash-value loan, the insurer:
- Electing to use policy dividends to buy paid-up additions will:
- The difference between the fixed-period and fixed-amount settlement options is that fixed-period:
- Under a life income settlement option, the size of each payment to the beneficiary depends primarily on the:
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PrepPass team · Verified against California Life & Health Insurance License Exam · How we review
Reviewed by John Zihao Zhang — California-Licensed Life Insurance Agent (CA Dept. of Insurance License #4396095 — verify)