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What are life insurance dividends?

On November 19, 2014, New York Life’s Board of Directors voted to increase our dividend payout in 2015 by 12% over the 2014 level.

You share in the surplus when you own one of our 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. Please keep in mind that the payment of dividends is not guaranteed.

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 Company2 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.3
  • 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.

2In Oregon, the New York Life Whole Life policy form number is ICC12213-50.

3Accessing cash value through loans and withdrawals will reduce the cash value and death benefit.