AD Banker Comprehensive Practice Exam

What is a postmortem dividend?

1. A second dividend declared after the initial dividend had been paid out

2. A dividend declared but held for future payout

3. A dividend declared and paid out at least one year after an insured's death

4. A dividend earned, but not yet paid, in the year of the insured's death and paid with the death claim

The correct answer is: A dividend earned, but not yet paid, in the year of the insured's death and paid with the death claim

A postmortem dividend refers to the dividends that have been earned but were not paid out in the year of the insured's death. These dividends are typically paid to the beneficiaries along with the death claim. In other words, the policyholder may have earned dividends during the policy year leading up to their death, but those dividends had not been distributed before the individual passed away. Therefore, the insurance company includes these earned dividends when settling the death claim, ensuring that the beneficiaries receive any benefits that are owed. This concept is tied closely to how mutual insurance companies operate, as they often declare dividends based on the company’s performance and share profits with policyholders. It highlights how benefits can be extended even posthumously, aiding the beneficiaries financially.