When an insured receives an annual dividend check from their life insurance policy, what is this arrangement known as?

In this scenario, when an insured receives an annual dividend check from their life insurance policy, this arrangement is referred to as the cash option. The cash option allows policyholders to take their dividends in the form of cash rather than using them to purchase more insurance or apply them toward premiums. This payment can provide immediate financial benefit to the insured, allowing them to use the funds as they see fit.

The cash option is a straightforward way for policyholders to access the dividends generated by their policy, reflecting a tangible benefit that comes from being a policyholder in a participating or mutual insurance company. The option emphasizes liquidity and gives the insured flexibility in how to manage this portion of their financial resources.