What are life insurance dividends?
On November 23, 2015, New York Life announced that eligible participating policyholders will receive a record payout of $1.7 billion in 2016, the largest in the Company’s 170 years.
Of the $1.7 billion being distributed next year, individual life insurance policyholders are expected to receive more than $1.6 billion, also a record payout. For more details, see nyl-dividend-payout.
You share in the surplus when you own one of our participating permanent policies.
A mutual insurance company (such as New York Life) operates for the benefit of its policyholders, who receive dividends if and when they are declared.
Here are the steps a mutual company goes through when deciding if it is prudent to declare dividends. This process only applies to mutual companies, not stock companies, which are managed to benefit their shareholders, not policyholders.
Participating policyholders pay premiums to New York Life in exchange for death benefit protection. Participating policies accumulate guaranteed cash value.1 After paying claims, expenses, and other liabilities, and funding the policy reserves used to provide for future benefits, the company determines how much should be distributed to policyholders. This amount is payable annually in the form of dividends.2
What can you do with your dividends?
You can use them to enhance the value of your policy or simply take them in cash. A permanent life policy from New York Life Insurance Company3 gives you the following dividend options:
- Purchase additional paid-up insurance—insurance that requires no future premium payments, already has cash value, and is itself eligible for dividends. As with the cash value of your basic policy, the cash value of paid-up insurance grows tax-deferred.4
- Repay policy loans. Use your dividends to repay loan interest, then principal.
- Reduce the premium of your basic policy with dividends.
- Leave dividends on deposit to compound at interest. (The interest you earn on these dividends, however, is taxable.)
- Take your dividends in cash.
- With some policies, you may be able to purchase one-year term insurance to inexpensively increase your overall insurance protection. (Electing this option requires underwriting.)
If you’d like to discuss your life insurance needs with a local New York Life agent, click here, and we’ll help find once close to you.
1The guarantees of a life insurance policy are based on the claims paying ability of the issuer.
2Dividends are not guaranteed, and because of the low interest rates that have persisted for several years, the non-guaranteed death benefits and future cash value accumulation in many policies will not equal the values illustrated at the time of purchase. Of course, the guaranteed cash value will, under all circumstances, continue to grow as described in your policy. Please contact your agent if you would like to go over your policy’s performance.
3In Oregon, the New York Life Whole Life policy form number is ICC12213-50.
4Accessing cash value through loans and partial surrenders of any paid-up additions will reduce the cash value and death benefit. Loans also accrue interest.