When you think about your life insurance policy, you probably think about the money that you have to pay in premiums in order to keep your policy. It is simply a fact of life that you will have to pay each month for the policy; however, some policies pay you back a little back.
The way that policies are able to pay you back is through something known as a dividend. A dividend is a specific amount of money set aside by the mutual life insurance companies to pay back to their policyholders. The amount of money that they set aside is determined by how much money they were able to bring in during the previous year. The more money that they make in profits each year, the more money they will be able to pay back in dividends.
The dividends can be doled out in a number of ways. The most obvious way and probably the most used way is a simple cash payment. The company sends the policyholders who choose this route a cheque for the amount of their dividend each year.
Another way in which you can choose to receive your dividend money is in reductions in the amount of money you owe in premiums. The company simply takes the dividend and subtracts it from your premium payments all throughout the year. This can create a little less strain on your budget each month.
The final way that you will be able to accept your dividends is by adding them on to the benefits that your policy pays out when the claim is made. This simply adds to the amount that your loved ones will receive when they claim the policy. Choosing this route creates a stronger policy for you and your family.
Regardless, of the way in which you accept your dividends, you should always be aware of the power that these dividends hold.