Who Offers Returns of Premium Life Insurance?
Return-of-premium life insurance is sold by mutual insurance companies. Some stock insurance companies also sell this type of policy, but most do not. Return of premium is commonly referred to as a dividend.
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Mutual or Stock
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Mutual insurance companies such as Guardian Life, New York Life, Penn Mutual Life, and SBLI Mutual Life, to name only a few, are not traded on the stock market. Stock insurance companies are traded. Hartford Life and Metropolitan Life are examples of stock insurance companies.
Participating
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Return-of-premium or dividend-paying life insurance policies are known as participating policies. The policy owner is participating in the profit of the insurance company and is considered a co-owner of the company.
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Whole Life Insurance
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Dividend-paying life insurance policies are always a type of whole life insurance policy. There are many types of whole life insurance. Term life insurance policies never pay dividends.
Return of Premium
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When a policy owner receives a dividend, it basically means he paid too much premium. The insurance company is returning the amount that was overpaid.
Receipt of Dividend
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Dividends can be received by the policy owner as a cash distribution, left with the insurance company to be invested, used to pay the policy premium in part or whole, or used to purchase paid-up additional insurance.
No Guarantee
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Dividends cannot be guaranteed. Dividends are earned when the insurance company reconciles its accounts, usually annually, and finds that it did better financially than predicted.
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