Which statement is true regarding non-taxable dividends?

Non-taxable dividends represent a way for policyholders of participating life insurance policies to receive a portion of the insurer's surplus profits, and they may be awarded based on the company’s performance. The statement pertaining to the receipt of non-taxable dividends accurately reflects that these dividends are determined and declared by the board of directors of the insurance company. This means that policyholders may receive dividends if the board decides to distribute them. Such declarations typically hinge upon the company's financial performance, investment earnings, and claims experience.

The nature of these dividends being non-taxable is rooted in the fact that they are considered a return of premium rather than income. However, it is important to note that receiving these dividends is not automatic; it is contingent upon the board's decision to declare them, recognizing that the decision is subject to the insurer's financial standing and the amount of surplus available for distribution. Thus, this is why the assertion about dividends being received if declared by the board is accurate.

In contrast, guarantees of dividends do not exist for all policyholders, as they are based on the company's performance rather than a contractual obligation. Likewise, the role of state authorities is limited to regulatory oversight of insurers rather than declaring dividends, and mutual insurers are not mandated to issue