Much like Ben and Jerry’s ice cream, life insurance comes in a lot of “flavours” and there are a multitude of reasons to choose one “flavour” over another. There really is no wrong choice per se, or one size fits all. It really comes down to individual circumstances as well as the need or gap that a client is looking to address. The only issue arises when a client does not have adequate coverage to address their specific needs.
So we know that some policies cover you for a temporary need, and some cover you for a permanent need, but did you know that you can also earn dividends through certain life insurance policies?
Generally speaking, a life insurance policy is an agreement between a policy holder and an insurer. The policy holder agrees to pay the premium, and in exchange, the insurer agrees to pay the benefit amount of the policy to a designated beneficiary upon your passing. However in a participating whole life policy, there is a secondary agreement. The insurer also agrees to share with the policy holder a portion of the company’s profits, paid through dividends. So in many ways, the policy holder is almost like an investor.
Things to keep in mind:
While many companies offer participating policies, it is important to remember that not all companies are created equal. Not all participating policies guarantee dividends! Participating policies even from the same insurer may be different, which is why it is very important to review options with your advisor and understand your contract.
Also, keep in mind that some companies are financially stronger than others. Reviewing the A.M. Best rating of an insurer can help determine which companies are more likely to fully pay out on dividends owed.
Remember, while you are unlikely to get rich from participating insurance dividends, they can still go a long way to increase your benefit amount or pay down your premium cost. However, they do require time and patience to realize the full benefits.
Do you have questions about your individual or estate life insurance and financial needs? Reach out to me directly and I will be happy to guide you through the process of choosing the right insurance and financial products to fit your unique needs.