Insurance Dividend Options

There are many options that can be utilized by a whole life insurance policy owner for dividend distribution. The available options vary depending on the insurance company and the policy purchased. Discuss the possible dividend options for your policy with your insurance agent.

Cash Payment

Dividends may be distributed as a cash payment to the life insurance policy owner. Dividends are considered a return to the policy owner on excess premiums paid. There are no income tax liabilities incurred by dividends.

Investment

The policy owner may elect to leave the dividends earned with the insurance company to be invested. Interest earned on the dividends will be subject to income taxation.

Paid-Up Additions

Paid-up additional life insurance can be purchased with dividends.

Premiums

The dividends can be used to pay the premiums on the life insurance policy. The premiums can be paid in full or in part, depending on the amount of dividends earned.

One-Year Term Insurance

Single premium one-year term insurance can be purchased with dividends.

Postmortem Dividends

If the insurance policy earns dividends between the last dividend distribution and the death of the insured, they are deemed postmortem dividends and may be distributed to the beneficiary when the death benefit is paid.

References

• Whole Life Insurance.com: Dividends Can Enhance Performance