Participating Life Insurance
A policyholder of participating life insurance receive dividends from their life insurance company, and only term life insurance or whole life insurance may be considered “participating”.
Dividends
When a mutual life insurance company issues policies and has a year where survival of their policyholders is higher and outweighs the anticipated mortality rate among a sample of insured individuals, the life insurance company pays out less in death benefits. The unused or extra life insurance premiums collected are then returned to participating life insurance owners in the form of a dividend.
The dividend is considered a partial refund of the policyholder’s life insurance price, so it is not taxable income.
Dividend Payment Options
Life insurance companies offer their policyholders several ways in which to receive their dividend. For example, a dividend may be deposited directly into your policy’s cash value, it can be applied to future premium payments, or be delivered as a cash payment to the insured.
One of the more popular options is when policyholders decide to buy “paid-up insurance” with their dividend or refund. Paid-up insurance is when each dividend payment buys additional life insurance coverage and pays for its entire future cost, thus increasing your policy’s death benefit, while maintaining cheap life insurance rates. Paid-up insurance essentially buys you additional coverage for free.
Life Insurance Quotes
Participating life insurance is just one of the many types of life insurance policies available through carriers. To learn more about different policy types, their coverage and rates, enter your 5-digit zip code to get free quotes on term, whole, universal, and variable life insurance.
TheLifeInsuranceQuote.com helps consumers compare life insurance quotes from the best companies in the U.S., allowing consumers to find affordable life insurance specific to their needs and budget.
