What are Life Insurance Dividends?

In 2022, New York Life will pay $1.9 billion in dividends on participation policies.

Whole life insurance policies that pay life insurance dividends offer the policy owner a variety of options for the use of that dividend. The common dividend options are as follows:

  • purchase paid up additions
  • repay policy loans
  • reduce the premium
  • pay to the policy owner in cash
  • accumulate by the insurer by interest

According to McGill’s Life Insurance, many insurance companies offer a fifth dividend option which applies the dividend to purchase one-year term insurance in varying amounts equal to the policy cash value, the face amount of the policy or the total premium. Any dividend amount left over after being used for the fifth dividend option is applied as directed by the policy owner.

Not all policies guarantee dividends. Dividends are defined as shares of the insurance company’s profit. But, profits go up and down. Consequently, the amount of dividends can vary over time. And if companies do guarantee a dividend, your premium may be higher.

If you do decide on purchasing a participating policy, make sure you check the company ratings and review. A.M. Best and Standard and Poor’s can provide information concerning insurance credit.

A.M. Best is a credit rating agency with over 100 years experience and a publisher of insurance industry references and resources. Best Insurance Reports provides detailed reports on thousands of insurers in the US, Canada around the world. These reports can:

  • Check a company’s Best’s Credit Rating, find out why a rating was assigned or changed and uncover rating history trends.
  • Learn what makes one company secure and another more vulnerable with our in-depth commentary on a company’s operating methods and management philosophy.
  • Use advanced search capabilities to identify companies that meet certain criteria for competitive research and benchmarking analysis.
  • Search and sort by financial, numerical and text fields, create custom lists, and export the most current data.
  • Research changes impacting existing companies, locate surviving insurers for companies that have gone out of business and more, dating back to 1819 with the Best’s Corporate Changes and Retirements database.

With offices in 25 countries, Standard and Poor provides high quality market performance value and one of the leading providers of global credit benchmarks being in business for more than 150 years. They examine everything from the state of the enterprise and how it ranks as far as the industry concerned.

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