Interest Option

Insurance policyholder's choice to reinvest dividends with the insurer to earn a guaranteed rate of interest. A beneficiary may also reinvest proceeds to earn interest.

Use of a life insurance policy dividend by the owner of a participating policy. Here the policy dividend is left with the insurance company to accumulate at a guaranteed minimum interest rate. Also, an interest option is a choice a beneficiary can make by leaving death proceeds with the insurance company to accumulate at interest. Interest earned under either option is subject to federal and state income taxes.