What is a non-direct recognition insurance company?

Question

related to life insurance

Answer 1

It is a whole life policy that will not reduce your dividends simply because you take a loan on it.  Please note that dividends cannot be guaranteed in any way by any one for good reason (something along these lines is probably written on the bottom of every page of the illustration to cover their tail).  Dividends may be higher, lower, or non-existent year to year.  Company strength and past dividends are not good indicators of future dividends.

If an agent makes a point of telling you their policy is non-direct recognition, it is usually in conjunction with a plan to use your cash value.  The primary reason for buying life insurance should always be death benefit.  Any cash value, if it happens, is a pleasant side effect.  Borrowing money from your life policy or relying on dividends in any way may result in unforeseen taxes and jeopardize your life insurance protection.