Insurance Dividends

Insurance Dividend

An annual fee an insurance company pays to whole life policyholders. The amount of the dividend is determined by the company's board of directors and is not guaranteed. This allows whole life policyholders access to at least part of their benefit before death. The insurance dividend can be taken in cash, but is almost always applied as a discount against future premium payments. This is a distinct advantage of whole life policies, though some analysts believe that insurance dividends do not make up for the expense of whole life insurance compared to term insurance.

Insurance Dividends

Amounts paid to policy holders are not dividends on capital stock, but are a rebate of a portion of the premiums paid for the insurance. Such dividends reduce the cost of the insurance and are not taxable unless in excess of the total premiums paid. Interest paid when the dividends are left with the insurance company is reported to the taxpayer as interest and is taxable.
References in periodicals archive ?
Life insurance dividends are not like stock dividends, which represent a return on investment.
SNL Financial: Expects to pay nearly $5 billion in permanent life insurance dividends in 2012, more than the next two competitors combined.
Additionally, life insurance dividends and excess interest must be used to reduce the following year's contribution.
And the amount of individuals' dividends would depend on the health experience of the group as a whole: precisely the sort of legally permissible contingency that lies behind traditional mutual insurance dividends.
The February change was boosted by farm subsidy payments and by a speedup of life insurance dividends to veterans (included in transfer payments).
Northwestern Mutual distributed nearly $48 million in permanent life insurance dividends in 2014 to policyowners who work with the company's Washington, D.C.

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