Whole Life Insurance Dividend Options

Whole life insurance is a form of permanent life insurance that as the name would imply lasts your entire life.  Typical whole life policies have both the premiums and death benefit last for your entire life.  However there are other versions of whole life insurance where this is not necessarily the case.

Whole life insurance can loosely be broken down into two types: Participating whole life insurance and Non Participating Whole Life.

Participating Whole Life Insurance can be defined as permanent life insurance, typically issued by a mutual insurer where the policy owner is allowed to share in the profits of the insurance company.

With a typical whole life policy the since the premiums are level clients overpay in the first half of the year and underpay in the latter half of the policies lifetime.

These profits manifest themselves as dividends.   Dividends from whole life insurance typically are exclusive of par insurers.

 The Six Ways to Take Dividends

There are anywhere between four to six ways to receive your policy dividends.
These Include:

• Receive the money via a check and cash it.
• Use the money to buy more temporary term insurance.
• Use the money to buy more whole life insurance (and hence possibly more dividends)
• Use the money to pay down any insurance contract loans
• Allow the money to simply accrue more interest
• Use the money to pay your yearly premium (often this will not pay the entire bill.)

These Four Five or Six Methods are not the same with all carriers but most carriers allow some of them and many of these are really quite the same.

Two Outliers or Dividend Options:

There are really two outlying options here:  Allow the money to accure more cash, which is typically not recommended.  This is not recommended for numerous reasons, but tax reasons are the biggest problem with this.

Allowing the money to buy more whole life insurance is a popular option with most pushy insurance agents who believe that this option allows clients to become uber wealthy.  This may or may not be true.  Although this option sounds grand, it is extremely difficult to follow through with it over the course of your entire life.

Stay Safe with Whole Life Insurance

Buying a whole life insurance policy in order to become wealthy may sound like a great idea, but you should be very cautious.   Most whole policies sold laps within about fifteen years.  Numerous studies have demonstrated this.

Always check the financial strength rating when buying any form of life insurance and thoughtfully consider your budget options when procuring it as well.

Participating whole life insurance can be a great tool when done correctly - this issue is it is rarely sold correctly.  Many people choose whole life partially because they do not know of the existence of term life insurance, which is usually far cheaper.

Shop carefully and ask lots of questions.