dividend policy

dividend policy
A most common form of life insurance policy issued under a plan whereby each policyholder pays annually in advance a fixed sum which, when added to like payments by others, probably will create a fund larger than necessary to meet all maturing policies and estimated expenses. At the end of each year the actual insurance costs and expenses incurred are ascertained. The difference between their sums and the total of advance payments and other income, then becomes the "overpayment" or surplus fund for immediate pro rata distribution among policyholders as dividends or for such future disposition as the contracts provide. An "annual dividend" policyholder receives his proportionate part of this fund each year in cash, as a credit upon or abatement of his next premium, or in the form of paidju p insurance purchased by the dividend. New York Life Ins. Co. v Edwards, 271 US 109, 115, 70 L Ed 859, 861, 46 S Ct 436.

Ballentine's law dictionary. . 1998.

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