Whole life is permanent life insurance that builds up cash value and it can also pay dividends. This means that you’ll have life insurance coverage for your entire life, as long as you continue to pay your premiums. Your policy will never be canceled so it is a good choice if you want life insurance coverage for the long-term (longer than a 30 year term policy, for example).
There are two main types of whole life insurance policies- non-participating and participating. The difference between the two is that participating whole life policies pay dividends. These dividends come from successful investments made by the life insurance carrier, as well as favorable mortality rates. You can choose to take your dividends in several ways.
Cash. Your dividends can paid be paid to you in the form of cash and you can use that cash in any way you choose. Life insurance carriers will typically mail these dividend payments to you in the form of a check.
Reduce your premiums. Your dividends can be used to pay a portion or all of your premium payments. For example, if you have a $200 dividend payment that is due to you and your premium payment is $1200 annually, you can choose to have your dividend be paid towards the premium due. So you’ll end up paying $1000 for the difference. In some cases, if the dividends are large enough, it can pay the premium entirely.
Pay off a policy loan. If you have borrowed from your whole life insurance policy, then you can choose to have the dividends be used as payment towards the loan balance or towards the interest due.
Once you decide on how you want your dividends to be paid, you’ll have to contact your life insurance carrier so they can update your policy with the correct mode of payment.
Get a free quote for dividend paying life insurance today to compare multiple rates from the nation’s top carriers.
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