Receive a Cash Payment: Your insurance company can pay you the dividend amount in cash. You can use this money immediately however you like, such as covering daily expenses, paying off debts, investing or saving for future goals.
Reduce Your Future Premium Payments: Dividends can also reduce your future premium payments. This option means the insurance company deducts the dividend from your upcoming premiums, lowering the out-of-pocket cost of maintaining the policy.
Leave the Dividends With the Insurance Company and Collect Interest: Instead of taking a dividend in cash, you can leave it with the insurance company for further financial benefit. The company will hold the dividend and return a specific interest rate over time. This way, the dividend increases the policy’s cash value. You can access your accumulated dividends in the future by withdrawing them or using them to improve the policy’s benefits.
Buy Paid-Up Additional Insurance: You can also use the dividends to purchase paid-up additional life insurance, increasing your policy’s death benefit and cash value. This option expands the benefits and financial protection your policy provides. Life insurance companies consider paid-up additions fully paid, not requiring further premium payments.
Buy One-Year Term Life Insurance: In some cases, insurance companies offer the option to use dividends to purchase one-year term life insurance. This temporary coverage enhances your existing policy for a specified period (typically one year). It provides an additional death benefit for that duration. This option allows you to increase your coverage temporarily without committing to permanent changes in your policy.
Repay Policy Loans: If you have outstanding loans against your life insurance policy, you can use dividends to repay them. Doing so reduces or eliminates the loan balance, which helps maintain the policy’s cash value and death benefit.