Which dividend option will increase the death benefit?

The option that will increase the death benefit is the choice of paid-up additions. When policyholders choose to receive dividends in the form of paid-up additions, these dividends are used to purchase additional, smaller whole life insurance policies on the insured, which provide an extra amount of death benefit. This increase is permanent as the additional coverage becomes fully paid-up without requiring further premiums.

Paid-up additions effectively boost both the cash value and the total death benefit of the policy. Since these additions are part of the original policy, they enhance the policy's performance and ensure the death benefit continues to increase over time as dividends are reinvested. This option allows for a strategic approach to managing both death benefit and cash value growth within a whole life insurance policy.

In contrast, the other options do not inherently increase the death benefit in the same way. For instance, extended term uses dividends to purchase term insurance for a limited time, reducing the overall insurance amount after the term expires. Reduced paid-up converts the policy to a fully paid-up status with a lower death benefit, and accumulation simply retains dividends within the policy for future interest earnings without increasing the actual death benefit until those dividends are eventually utilized.