A is correct. A participating life insurance policy permits the policyowner to participate in the insurer's divisible surplus through policy dividends when such surplus is available. Hawaiʻi's standard life-policy provisions expressly address participation in surplus . The statutory provision requires that, beginning not later than the end of the third policy year , the insurer annually ascertain and apportion any divisible surplus accruing on the policy anniversary or other dividend date specified in the contract.

The law also recognizes different dividend options. A dividend may generally be payable in cash or applied to another dividend option provided by the policy. This is why C is incorrect: policyowners are not restricted to receiving dividends only when the entire amount is automatically reinvested.

D is specifically contrary to participating-policy mechanics. One common contractual dividend option is purchasing paid-up additions , which increases life insurance coverage. B does not identify the statutory obligation being tested. While policies disclose applicable dividend options, the central requirement in the question is the annual ascertainment and apportionment of divisible surplus.

Importantly, policy dividends are not guaranteed merely because a policy is participating; dividends depend on divisible surplus determined under the policy and insurer's experience.

Reference topics: Participation in Surplus; Participating Life Insurance; Dividend Options; Paid-Up Additions; Hawaiʻi Standard Life Policy Provisions.