How to Get a “Share of the Profits” From Your Life Insurance Company.
I’m Not Just a Customer; I’m a Part-Owner.
I chose to buy my whole life policy from a mutual insurance company. Unlike a stock company owned by shareholders, a mutual company is owned by its policyholders. This means that when the company does well—by having good investment returns and lower-than-expected claims—it shares the profits with me in the form of an annual dividend. I’m not just a customer paying a bill; I am a part-owner of the company, and I get to participate in our collective success every single year.
The Power of Dividends: How They Can Pay Your Premiums (and More).
My Policy Now Pays for Itself.
After paying premiums on my participating whole life policy for 18 years, I reached a magic milestone. The annual dividend the company paid me was now larger than my annual premium. I directed the company to use my dividend to pay my premium automatically. The policy now funds itself, and I don’t have to pay another dime out of pocket. In fact, there’s even a little extra dividend left over, which I use to buy more paid-up insurance, further increasing my cash value and death benefit.
Non-Participating Policies: The “What You See Is What You Get” Guarantee.
No Dividends, But No Surprises Either.
My friend wanted permanent life insurance, but he hated the idea of a dividend that wasn’t guaranteed. He chose a non-participating policy—a Guaranteed Universal Life (GUL). The premium is lower than a participating policy, and the death benefit is guaranteed to remain in force as long as he pays that premium. There’s no potential for upside from dividends, but there’s also no guesswork. He knows exactly what he has: a simple, guaranteed contract. It’s the “what you see is what you get” approach to permanent insurance.
Are Dividends Guaranteed? The Truth About Participating Whole Life.
It’s a Remarkable Track Record, But Not a Rock-Solid Promise.
It’s crucial to understand that life insurance dividends are NOT guaranteed. However, the major mutual life insurance companies have an incredible, unbroken track record of paying them every single year for over a century—through the Great Depression, World Wars, and every recession. While they can’t legally guarantee the dividend, their history of consistently paying one provides an extremely high level of confidence. You are betting on a track record of remarkable stability and financial prudence.
A 100-Year History of Dividend Payments from a Top Mutual Insurer.
A Story of Unbroken Promises.
My agent showed me a chart of the dividend interest rate paid by a major mutual insurer every year since 1920. It was a powerful visual. The rate went up and down, but there was never a year with a “zero.” Not once. Even in the depths of the Great Depression, they paid a dividend. Seeing that 100+ year history of unbroken promises gave me more confidence than any sales pitch ever could. It proved the company’s commitment to its policyowners through thick and thin.
Why a Non-Participating Policy (Like a GUL) Can Be Better for Pure Protection.
Maximum Guaranteed Benefit for the Lowest Price.
If your one and only goal is to get the largest possible, lifelong, guaranteed death benefit for the lowest possible premium, a non-participating policy like a Guaranteed Universal Life (GUL) is usually the winner. Because it strips out the potential for dividends, its premiums are calculated with more certainty and are therefore lower. A participating policy directs some of its premium towards creating the potential for future dividends. For pure, lean, guaranteed protection, non-participating policies are more efficient.
The 5 Ways You Can Use Your Life Insurance Dividends.
It’s Your Money. You Choose.
Every year, my insurance company sends me a notice about my dividend, and I have five choices. I can: 1) Take it in cash. 2) Use it to reduce my premium payment. 3) Leave it with the company to accumulate interest (like a savings account). 4) Use it to buy paid-up additions (the best option!). 5) Use it to buy one-year term insurance. This flexibility allows me to adapt how I use my policy as my life changes, giving me incredible control over my asset.
Participating vs. Non-Participating: Are you an Owner or a Customer?
The Fundamental Difference in Your Relationship with the Company.
This is the core distinction. When you buy a participating policy from a mutual company, you become a member and a part-owner. You have a stake in the company’s success. When you buy a non-participating policy from a stock company, you are simply a customer. The company’s profits go to its shareholders, not to you. The question is, do you want a relationship where you are a customer purchasing a product, or one where you are a member-owner participating in the collective enterprise?
How Dividends Can Dramatically Increase Your Death Benefit Over Time, For Free.
My $500k Policy is Now Worth Over $700k.
When I bought my participating whole life policy 25 years ago, the death benefit was $500,000. Every year, I’ve used my dividend to purchase small “paid-up additions.” Each PUA adds to my total death benefit. Today, thanks to decades of dividends being reinvested, my original $500,000 policy now has a total death benefit of over $700,000. I never paid an extra dime for that additional $200,000 of coverage. It was all generated internally by the power of compounding dividends.
The Trade-Off: Higher Potential with a Par Policy vs. Lower Guaranteed Premiums with a Non-Par Policy.
Opportunity vs. Certainty.
The choice between a participating (par) and non-participating (non-par) policy comes down to a simple trade-off. A par policy has a higher initial premium, but it gives you the potential to receive dividends, which can dramatically enhance your policy’s performance over the long run. A non-par policy offers a lower guaranteed premium, but what you see is what you get, with no potential for upside. It’s a choice between paying more for the opportunity of growth versus paying less for a simple guarantee.