26-16-107. Dividends.

(a) In participating policies, beginning not later than the end of the third policy year, the insurer shall annually ascertain and apportion the divisible surplus, if any, that will accrue on the policy anniversary or other dividend date specified in the policy, provided the policy is in force and all premiums to that date are paid. Except as otherwise provided in this section, any dividend payable, at the option of the party entitled to elect the option, shall be either payable in cash or applied to any of the other dividend options provided by the policy. If any other dividend options are provided, the policy shall further state which option is automatically effective if the party does not elect some other option. If the policy specifies a period within which the other dividend option may be elected, the period shall be not less than thirty (30) days following the date on which the dividend is due and payable. The annually apportioned dividend is payable in cash within the meaning of the cash option specified in this subsection even though the policy provides that payment of the dividend is to be deferred for a specified period, provided the period does not exceed six (6) years from the date of apportionment and that interest will be added to the dividend at a specified rate.

(b) Renewable term policies of ten (10) years or less may provide that:

(i) The surplus accrued to the policies shall be determined and apportioned each year after the second policy year and accumulated during each renewal period;

(ii) At the end of the renewal period, on the insured's renewal of the policy, the insurer shall apply the accumulated surplus as an annuity for the next succeeding renewal term in reducing premiums.

(c) In participating industrial life insurance policies, instead of the provision required in subsection (a) of this section, there shall be a provision that beginning not later than the end of the fifth policy year, the policy shall participate annually in the divisible surplus, if any, in the manner set forth in the policy.

(d) This section does not apply to insurance issued in consideration of lapsed or surrendered policies.