- What is an insurance dividend?
- February 28, 2014
Disaster mustn’t need to strike in order for you to collect money from your insurance company. These annual payouts, called dividends, can occur under happier circumstances.
A mutual insurance company, which is owned by its policyholders, pays dividends on policies. Non-mutual insurance companies may pay an insurance dividend on participating policies, which are contracts that pass along surplus money to policyholders.
When a company pays out fewer claims than expected, or spends less than anticipated on agent commissions, office expenditures and advertising, current policyholders may receive a dividend or part of their death benefit.
For example, if the insurer calculates its premiums assuming that it will earn 4 percent interest on its reserves, and the company actually earns 8 percent, the participating policyholders could receive a dividend.Pages: 1 2
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