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Simple English definitions for legal terms
deferred-dividend insurance policy
Read a random definition: Military Rules of Evidence
A quick definition of deferred-dividend insurance policy:
A deferred-dividend insurance policy is a type of life insurance that accumulates a fixed percentage of the insurer's surplus profits. This money is paid out as a lump sum on a certain date or at the insured's death, whichever comes first. It's like saving money for the future, but with the added benefit of insurance protection.A more thorough explanation:
A deferred-dividend insurance policy is a type of life insurance policy that accumulates a fixed percentage of the insurer's surplus profits. The accumulated amount is payable as a lump sum on a certain date or at the insured's death, whichever comes first.
For example, John purchases a deferred-dividend insurance policy with a 5% accumulation rate. Over the years, the insurer's surplus profits increase, and John's policy accumulates $10,000. When John dies, his beneficiary receives the accumulated amount in addition to the death benefit.
Deferred-dividend insurance policies were popular in the past but are now rare. They illustrate how life insurance policies can accumulate cash value over time.