How Do Whole Life Insurance Dividends Work

Hi I'm Mark Spokesperson for LSM Insurance Whole life insurance, as the name implies, provides coverage for your entire lifetime. Whole life policies can be divided into two categories: participating and non-participating. Both policies provide level premiums, lifetime protection and a guaranteed cash value—but participating whole life plans pay an annual dividend.

The annual dividend is NOT guaranteed, and in most instances is linked to long-term interest rates as well as the insurance company’s performance. If you have an existing participating whole life policy which was purchased in a high interest environment, it is a good idea to request an updated policy illustration—the projected values may have changed dramatically. Most participating whole life policies have multiple dividend options.

The following is a brief look at some of the different dividend options: Dividends on deposit – the annual dividend is kept on account within the policy Paid-up additions – the annual dividend is used to purchase additional paid-up insurance Premium reductions – the annual dividend is used to reduce the annual premium Term option – the annual dividend is used to buy paid-up term insurance

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Labels: insurance, life insurance, life insurance advice, Life Insurance Dividend, life insurance tips

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