When you buy a participating life insurance policy you earn dividends on your policy.
Policies earn them when the company performs well and should not be confused with those earned from ownership of stock.
They keep operating expenses down and maintain profitable investments.
They are not guaranteed. You accumulate them on whole life policies or any participating permanent life insurance policy.
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Mutual Life Insurance companies are owned by their policy owners. They have no stockholders.
The insurance company sets premium rates by anticipating the costs of contractual obligations, unexpected losses and operating expenses.
If there is an excess in earnings, policy owners participate equitably in this surplus.
How Are They Determined?
They are determined by considering the following factors:
Policy loans do affect dividends.
How To You Use Them?
The Tax Effects.
Because they are a return of premium they are not usually taxable.
However, whenever they earn interest and together they exceed the premiums paid they are subject to taxes.
Let us examine how dividends are calculated.
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