Florida Life and Health Insurance License Practice Test

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Prepare for the Florida Life and Health Insurance License Test. Study with flashcards and multiple choice questions, each with hints and explanations. Get ready for your certification exam with ease!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Which of the following Dividend options results in taxable income to the policyowner?

Paid-up additions
One-year term option
Accumulation at interest
Cash option

The correct answer is: Accumulation at interest

Accumulation at interest refers to a dividend option where the insurance company invests the dividends into a separate account, earning interest. This results in taxable income for the policyowner since the dividends are considered to be earnings and not a return of premiums. The other options are not taxable because Paid-up additions increase the death benefit and are considered a return of premiums, not income. One-year term option provides a one-year term insurance coverage and does not generate any income. Cash option simply pays out the dividends in cash and does not generate any additional income.