Question on dividends and whole life insurance.

Question

How do dividends work with whole life insurance. From my understanding, you can use your dividends to pay your premiums and after a while your dividends cover your premium costs all together. Does this happen? Can anyone recommend an insurance company that pays good dividends?

Answer 1

A dividend is a return of your premium.  So, it is like you were overcharged and then get some money back.  I do not recommend this plan.  Dividends are not guaranteed and you have to have the policy a long time before it would ever start paying for itself.

If you want to invest put your money into an IRA or something that is tax deductible or a tax writeoff.   See a Stockbroker or financial advisor and not an insurance agent for investing.  

Answer 2

It may or may not happen.  I'm sure the agent you talked to explained how no person or entity could guarantee dividends.  I would imagine it's written at the bottom of every piece of paper he or she gave you.  There is a good reason for this.

I don't personally recommend buying insurance in order to get dividends because no one is certain you will get them, or if you do, how much they will be.  It's just a bonus if it happens.

edit: If you are looking for someone with a more objective opinion, don't talk with a "financial advisor", talk with a "fee-only financial planner".

Answer 3

Allstate Financial they have Personal Financial Representitives. It is beter to sit down and talk to someone in FEILD  

Answer 4

Dividends are NOT GUARANTEED!  Once you have tons and tons of cash value, the interest from them (called dividends) MIGHT be enough to cover your premiums.  

It happened for a while way back when, and then, it stopped happening, and people didn't pay their premiums, and their policies cancelled.  

Insurance companies will NEVER pay as much dividends as, say, a money market where you put the same amount of money in.  Insurance is NOT a smart investment tool.  It's a financial planning tool, to account for DEATH.

Answer 5

Dividends are not a return of your premium AND you don't buy life insurance from a car insurance company.

Don't buy an insurance policy because of the dividends that it may or may not pay down the road.  There are good plans that don't pay dividends.  Buy a whole life insurance policy if the plan meets your needs.  But, before you consider a whole life insurance policy consider a 30 year return of premium term policy which will get you a better return on the excess premium you're paying over term life, AND if 30 years isn't going to cut it then consider a universal life policy with premiums guaranteed to age 100 which should be a fraction of the cost of the dividend paying policy.