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LSDefine
Simple English definitions for legal terms
dividend addition
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A quick definition of dividend addition:
Dividend Addition: When you have a life insurance policy, sometimes the company may give you extra money called a dividend. You can use this money to buy more insurance by adding it to the amount of money your policy is worth. This is called a dividend addition. It's like using the extra money you get for doing a good job to buy something you want.
A more thorough explanation:
DIVIDEND ADDITION
Dividend addition is an extra amount of money that can be added to the face value of a life insurance policy. This extra amount is purchased by using a dividend as a single premium payment.
Let's say you have a life insurance policy with a face value of $100,000 and you receive a dividend of $1,000. You can choose to use that dividend to purchase a dividend addition, which would increase the face value of your policy to $101,000.
Another example would be if you have a policy with a face value of $50,000 and you receive a dividend of $500. You can use that dividend to purchase a dividend addition, which would increase the face value of your policy to $50,500.
Dividend addition is a way to increase the face value of a life insurance policy without having to pay additional premiums. The examples illustrate how a dividend can be used to purchase a dividend addition, which in turn increases the face value of the policy. This can be a good way to increase the amount of coverage you have without having to pay more money out of pocket.