Dividend Paying Life Insurance

Dividend Paying Life Insurance

Life insurance can be viewed as a sort of life saving plan that is preferred over other methods of saving because of its flexibility. In its basic nature, life insurance plans require the payment of certain premiums by the insured party for a certain period of time. These payments can be automatized to be accepted automatically through bank deductions.

This presents a sort of forced payment plan that ensures that one pays for their premiums at the time they are supposed to. This scheme is especially beneficial for those who do not have disciplined saving habits and may opt out of a certain month’s savings because of inadequate funds. It is because of this that it is favored over some other savings schemes that encourage one to save their money in separate accounts for future use.

Dividend paying life insurance offers an added advantage to the ones presented by the simple life insurance schemes. Life insurance provides options that allow the sum assured to be passed on to the beneficiary in the event of death of the insured. This presents protection for the insured’s family allowing them peace of mind. Dividend paying life insurance however, goes further to provide additional payments to the insured based on the company’s performance in the financial market.

If the insurance company accumulates profits, these are shared in the form of dividends to its insured members allowing additional benefits to be accrued in signing up for insurance with such companies. 

Insurance companies obtain their extra profits through the investment of premiums that are given out by the insured members. These premiums are accumulated and thus invested into high end stocks and safe investment options like bonds. These have got a secure, guaranteed and high payment return options that ensure that the insurance company’s funds are secure. Dividend paying life insurance thus offers the option of tapping into these returns which may at times be negative. In the event that the insurance company does not make any profits then such dividends may not be paid out at all.

Dividend paying life insurance also allows the insured members to participate in investment of their own savings. Most insurance companies present the option of withdrawing a certain percentage of one’s funds in the form of a loan that can be used to finance their own personal projects. This presents added benefits to the insured because they are able to access a certain percentage of their savings for private use.

This is done all the while the initial insurance cover is not tampered with and the benefits to be accrued as still awarded. Dividend paying life insurance also offers a tax free option to investment. This means that the sum assured to the members is paid out at the end of the insurance period just in the exact amount stated. There are no taxes that are levied on these amounts making it is a suitable option for long term investment. Withdrawals of any form of money from these accounts is also not taxed as seen in loans which are still considered part of the initial sum assured by the insurance company.

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