What Are Life Insurance Dividends

Life insurances come in many shapes and at different costs. If you are wondering what are life insurance dividends you must first understand how life insurances work. Dividends are only paid for participating whole life insurances. They represent a return of cash to the policy holder if the insurance company is having a better year than it was anticipated. However before purchasing such a policy you need to establish whether or not it really fits your needs.

A lot of people fail to see the difference between an insurance and an investment. Sure in some conditions an insurance can be considered an investment in the family’s future. Some people even purchase insurance with a million dollars coverage. However the main purpose of an insurance is to take care of the family in case something were to happen to you. Usually if your children are all grown up and both you and your spouse have a good retirement plan you might not need insurance at all. But if you are the only family provider and you have a spouse and two children depending on your income you should definitely get an insurance.

Deciding between term and whole life is quite simple. Term just protects you for a number of years until your children are able to take care of themselves. Whole life is in case you think that your family might need financial support even after becoming adults. It can also be useful if your spouse doesn’t work and doesn’t have a good retirement plan. If you think that term is best choice for you than you should forget all about life insurance dividends and find another way of investing your money.

A participating whole life policy is a type of insurance that generates extra cash for the insurer if a company has better results during a year than what it was anticipated. This money is usually paid to the insurer on the policy’s anniversary. It can either be paid in cash or in the shape of a check. A participating policy usually has greater life insurance quotes than a normal whole life policy. The dividends are not guaranteed but they can be predicted if you take into account the company’s past performances. A person can either collect the dividends or he can leave them in the insurance account where they generate interest. You can also use them to buy policy additions that also generate interest.

The life insurance dividends are an attempt to turn insurances into investments. However the problem is that the extra money you pay in premiums rarely manages to make a profit. It may be tempting at first but if you think about it logically why would the insurance company return some of their profit to you? The dividends are merely a symbolic value of the company’s profits.