Policy mechanics

Dividend

A dividend in life insurance is a share of a carrier's surplus paid to owners of participating policies. It is not guaranteed and can change each year based on the carrier's results.

Why it matters

Dividends mostly come from mutual carriers and some stock carriers that issue participating whole life. Owners may take cash, lower premiums, buy paid-up additions, or leave the money to earn interest. Paid-up additions can grow cash value and the death benefit. Because dividends are not promised, do not count on them when you choose a policy.

Source: law.cornell.edu

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