What Is Dividend-Paying Life Insurance?

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Dividend-paying life insurance is typically only used for a cash insurance policy. Find out about dividend-paying life insurance with help from a financial industry expert in this free video clip.

Part of the Video Series: Life Insurance Lessons
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Video Transcript

Hi, my name is Phil Cioppa. I'm the host of the nationally syndicated talk radio program, "The Phil Cioppa Show," and the question comes to us today, what is a dividend paying policy? A dividend paying policy is usually only used for a cash insurance policy. So if you have a whole life policy, universal life or variable universal life, if the company decides that their profits have superseded that which they thought there were going to be or they have excess money on hand, if they are a fraternal benefit society like Thriving Financial for Lutherans or The Knights of Columbus, they need to by law, give back money to its members, they can pay dividends on your insurance, and so that means that it would add to your interest, it would add to your principle in the cash policies that you are accruing cash. Now there's one thing to be careful of. There's nothing that says dividends have to be paid. That is a the discretion of the insurance company. So it's a wonderful benefit to have, it's a benefit that can serve you very well, but it's not a benefit that's going to necessarily be there. The best way to ascertain how good your company is at paying dividends is by going back, looking at its history through good times and bad, and see if there's been some kind of consistent sharing of the profit through dividend-giving. Thank you very much.

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