Maryland Life and Health Insurance License Practice Exam

The Accumulation at Interest Option is the correct answer because this choice allows the insurer to take the policyowner's dividends and invest them, earning interest on the accumulated amount. As dividends accrue, the interest earned is added to the policyholder's account. This method effectively increases the total value of the dividends over time, as policyowners can benefit from compound interest on the accumulated dividends.

The other options serve different purposes. The Cash Payment Option provides the policyowner with the dividends in cash, negating any investment or interest accrual. The Reduction of Premium Option applies the dividends towards reducing future premium payments, which does not involve investment or interest earnings. Lastly, the Paid-up Additions Option uses the dividends to purchase additional paid-up insurance coverage, thereby increasing the death benefit without the potential for interest on the dividends themselves. Each option offers unique benefits, but the Accumulation at Interest Option is specifically designed for investment and growth through interest earnings.