Dividend Paying Life Insurance

Insurance That Pays You

Dividend paying life insurance is a kind of Whole Life Insurance , where the policy owner gets good returns from the company if it does well financially. Policy owners pay a premium, which is used by the company to make safe investments (like bonds), making sure the risks are kept at minimum.

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So, not only do the policy holders get life insurance , which will be paid out to the heir after their death, they also get these performance-based dividends, based upon the company’s annual performance. The better the Insurance Company performs, the higher dividends. Though the vice versa is true as well. In bad times, policy owners don’t get any dividends at all. This is a risk that they should be prepared to take, for if their calculations are right, and the company makes huge profits, they get a better share of the profit as well.

Guaranteed Returns

The plus point of dividend life insurance, or Participating Life Insurance, is that after a period of time, when their policy cash is large enough, they can borrow out of their policy for personal use, while the dividends continue to come. Called self-banking, this concept is of great use, since the policy cash will get used on the one hand, and on the other it will continue to fetch dividends.

Another good thing about this kind of insurance is that the policy cash is tax-free. Even withdrawals are not taxed as the loan is given as a return of capital. Also, at the time of final pay out to the heir, there is no tax levied on the amount. The pre-decided and fixed insurance amount will be paid in full to the heir, with no deductions whatsoever.

Also, one has to remember, that in the case of a Dividend Paying Life Insurance Policy, the owner of the policy is the policy holder and not the banking institution. While the premium paid by the individual is used by the company, whether to loan it to someone or as an investment, it is the policy owner who has the first right over the policy cash. The owner decides whether he/she wants to use the cash or not. Only if policy owners allow can the company use their money.

People don’t think that taking a whole life insurance is beneficial, since the premiums are higher when compared to a fixed tenure life insurance policy. A dividend paying life insurance policy is not a way to get rich quickly. It involves a lot of planning, wise judgement, and above all a lot of patience, for it takes a while to see good results. Think about it, wouldn’t you rather take this policy, pay a higher premium, have full control over your finances, be your own banker, secure your retirement and also secure your heir’s future?

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