Cash And Premium Reduction With Life Insurance Dividends

Practically all participating policies provide for the payment of dividends in cash. The majority of dividends are not paid in cash, however, because of the relative advantages of using the other options. 

Applying dividends to the next premium is essentially the same as taking them in cash and resubmitting them toward the payment of the next premium. Generally, as the cash value of a policy grows, the dividends will increase, thus making the next premium lower. 

Accumulate at Interest 

Rather than take the dividends in cash and deposit them in a bank or savings institution, the policyholder may leave them with the insurer. A guaranteed rate of interest, compounded annually, is common, although many companies vary the interest rate depending upon their investment earnings. Generally, dividends may be withdrawn at any time. In many cases they are left with the company until the insured retires, thereby substantially increasing the amount of money available for retirement. If the insured dies before retirement, the accumulated dividends are added to the face of the policy and paid to the beneficiary.