Life Insurance Dividends Explained

With so many different types of life insurance policies available, it can be quite confusing to figure out which particular policy is right for you. One type of insurance plan you should strongly consider is a whole life insurance policy. If you do decide to go with a whole life insurance policy you will have level premiums, guaranteed death benefits, and dividends.  

Whole Life Insurance Dividends

Not all whole life insurance policies will provide life insurance dividends but it is something you can ask your agent about when shopping around for a whole life insurance policy. A life insurance dividend is a payout from the annual surpluses of the life insurance company. In a sense, it is a portion of the carrier’s profit that some whole life insurance policies provide to policyholders. 

Popular Life Insurance Dividends

There are many different kinds of dividend options within life insurance companies and they vary on how you can use them. 

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  • Policy loan repayment- you can choose this option to pay the principal or interest of your policy loans.
  • Cash payment- you can choose to get your life insurance policy dividend as a cash payment, which is kind of similar to the dividends you would receive from stock. The life insurance company will pay your dividend at the beginning of the first or second policy year and will be treated as a tax-free return of premiums.
  • Paid-up additions-  this is the additional life insurance coverage of the same type that are policyholder by, using the dividend. Your paid-up additions will also earn dividends.
  • Accumulate interest- You can opt to keep the dividends with the life insurance company to earn and accumulate interest over time. At any time you can withdraw cash from your dividend accumulation account, and if you were to die or want to surrender your policy, your policy will pay the face amount or the cash surrender value.
  • Reduce future premiums- you can apply your dividends to lessen or reduce future life insurance premiums.

Are The Dividends Taxable?

The dividends that you earn from any whole life insurance policy, if they are offered, are not taxed by the IRS. Life insurance dividends are not like traditional dividends from a mutual fund or stock so are not subjected to taxes

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Your family has financial obligations that will not go away when you are gone. They will need your help more than ever with their expenses, and the last thing you want them to worry about is money while they are grieving. There are many great affordable life insurance options to choose from that will provide enough money for your family, for a low monthly price. The best way to find the right life insurance policy for you and your specific needs is by working with an agent who specializes in life insurance. We have provided the top life insurance companies in the nation below; each offers hassle-free assistance and the most competitive rates. Always check multiple sites to make sure you have bargaining power and know the advantages of each company. Make sure a hard time isn’t made harder by a financial burden, check life insurance rates today.