What is a policy dividend?
A. A dividend is paid by a life insurance company on an annuity or life insurance policy. Technically, a policy dividend is a return of excess premium paid on the policy. Dividends are an important part of a participating policy, and they are a way for the company to share part of its favorable results with policyholders. In general, dividends increase as the number of years that a policy is in force increase.
A policy dividend is an amount of money returned to the Policyholder of a participating policy. The money is a partial refund of the premiums paid. It results when actual mortality, investment earnings and expenses are more favorable than were expected when the premiums were set. Therefore, dividend amounts are not guaranteed.
