Annual Dividend - Insurance

Dictionary Says

Definition of 'Annual Dividend - Insurance'

In the insurance industry, a yearly payment given by an insurance company to a policyholder. Annual dividends are most commonly distributed in conjunction with life insurance and disability income insurance policies. Insurance companies may pay their customers an annual dividend when the company's investment returns, experience (paid claims) and operating expenses in a given year are better than expected. Dividend amounts change each year and are not guaranteed.

Annual dividend calculations are based on the individual insurance policy's guaranteed cash value, the policy's annual premium, the company's actual mortality and expense costs and the dividend scale interest rate. Insurance companies need to make sure they earn enough in premiums each year to cover their expenses, reserves and contingencies, but they may choose to share a surplus with their customers. Policyholders who have borrowed against their policies may receive reduced annual dividends while the loan is outstanding.

Investopedia Says

Investopedia explains 'Annual Dividend - Insurance'

Annual dividends can be applied to annual premiums to reduce the customer's cost of carrying the policy. They can also be applied to increase the policy's value, used to purchase additional insurance, be distributed as cash or used to repay a policy loan. With some exceptions, dividends are generally considered a return of premium and so are not taxable as income.

Articles Of Interest

  1. Permanent Life Policies: Whole Vs. Universal

    If you're looking for life-long security, choosing between these two is the key.
  2. Variable Vs. Variable Universal Life Insurance

    Do you know why you might need one policy versus the other? Read on to find out.
  3. How To Avoid Taxation On Life Insurance Proceeds

    Decrease the value of your taxable estate and prevent the tax man from getting you one last time.
  4. Life Insurance: How To Get the Most Out Of Your Policy

    There are many benefits to owning a life insurance policy - if you get the right one for you.
  5. Life Insurance Clauses Determine Your Coverage

    Understanding these key parts of your policy will help you to ensure that your family will be covered.
  6. Life Insurance: Putting A Price On Peace Of Mind

    Would your death leave loved ones financially stranded? Find out how to ease your mind and keep them protected.
  7. How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  8. 5 Things You Should Know About The New Health Insurance Marketplace

    Here are five things you should know about the new Health Insurance Marketplace (AKA Health Insurance Exchange), which launches on October 1.
  9. A Top-Down Approach To Investing

    Use a global view to determine which stocks belong in your portfolio.
  10. Yield Investing: Dividend, Earnings And FCF

    There are numerous ways to value investments, and many investors prefer a specific valuation method. Yield investing is one way to value a stock by comparing the current price to various factors. ...
comments powered by Disqus
Marketplace
Hot Definitions
  1. Racketeering

    Racketeering refers to criminal activity that is performed to benefit an organization such as a crime syndicate. Examples of racketeering activity include...
  2. Lawful Money

    Any form of currency issued by the United States Treasury and not the Federal Reserve System, including gold and silver coins, Treasury notes, and Treasury bonds. Lawful money stands in contrast to fiat money, to which the government assigns value although it has no intrinsic value of its own and is not backed by reserves.
  3. Fast Market Rule

    A rule in the United Kingdom that permits market makers to trade outside quoted ranges, when an exchange determines that market movements are so sharp that quotes cannot be kept current.
  4. Absorption Rate

    The rate at which available homes are sold in a specific real estate market during a given time period.
  5. Yellow Sheets

    A United States bulletin that provides updated bid and ask prices as well as other information on over-the-counter (OTC) corporate bonds...
  6. Bailment

    The contractual transfer of possession of assets or property for a specific objective.
Trading Center