What option allows dividends from a life insurance policy to accumulate as interest?

The option that allows dividends from a life insurance policy to accumulate as interest is known as accumulation at interest. This choice provides the policyholder with the ability to let their dividends earn interest over time, which can contribute to increasing the overall cash value of the policy.

When dividends are left to accumulate at interest, they do not simply remain as a fixed amount; instead, they grow based on a rate of interest determined by the insurer. This can be beneficial for policyholders who prefer to keep their dividends invested for future use, enhancing their overall financial strategy regarding their insurance plan.

In contrast, other options such as paid-up additions allow dividends to be used to purchase additional insurance coverage, while the cash option would provide the policyholder with cash instead of allowing for growth through interest. The reduction of premium option utilizes dividends to decrease future policy premiums but does not accumulate interest on the dividends themselves as the other choice does.