What is Dividend Paying Whole Life Insurance?

UPDATED March, 2024

Whole life insurance is a type of permanent or “cash value” life insurance that provides benefits for the “whole” of your life (versus term insurance that only lasts for a specific period of time).

Some companies offer dividend paying whole life insurance policies which means the policies pay dividends. These policies are also known as participating whole life insurance, because the policy owners (rather than the stockholders) participate in the profits generated by the company, by receiving dividends.

Whole life policies have a guaranteed, pre-set annual cash value increase. These guaranteed increases are based on a “worst-case” financial results scenario projected by the insurance company.  In a participating policy, at the end of the year, the company does an accounting of the death claims paid, their earnings, and the expense of running the company and the premiums it collected.  If they did better than their worst-case projection, they pay the policy owners a dividend.

Dividends are not guaranteed, however some companies have paid them every single year for over 160 years, including during the Great Depression.

A company that issues a participating whole life policy pays out profits it earns to its policy owners in the form of dividends, and some companies have paid dividends every year for over 100 years”

The formula that each life insurance company uses to calculate the dividend it credits to any given policy is based on a complex formula, but this example of the growth of dividends in an actual policy may help…

Check out the progression of the annual dividends that have been credited to an actual policy – one which was started in 2005.

This is one of numerous whole life policies my family owns. The dividends we received were in addition to the guaranteed annual cash value increases we’ve received every year.

As you can see, in all but two out of 19 years, the annual dividend credited was larger than the year before. You probably remember the major market crash of 2007-2009 during which the S&P 500 lost 57%. But this policy, like all whole life policies, has just kept chugging along, blissfully oblivious to the Wall Street roller-coaster ride:


Dividend Credited (Rounded to nearest dollar)
2006 $1,694
2007 $3,109
2008 $6,459
2009 $6,707
2010 $8,125
2011 $8,909
2012 $9,651
2013 $9,436
2014 $9,672
2015 $10,481
2016 $11,470
2017 $11,007
2018 $11,528
2019 $12,551
2020 $13,491
2021 $14,265
2022 $15,002
2023 $15,799
2024 $17,446
Total: $196,822


Each year we reinvested the dividends, which means we left them in the policy to purchase fully “paid up” life insurance, which is life insurance you’ll never pay another premium on. Reinvesting your policy dividends is a very powerful strategy because it increases both your cash value and your death benefit in the most efficient way possible by buying the lowest amount of death benefit possible.

I can hardly wait to see how big the dividends in this policy will be in 10 or 20 years! And I’m thrilled they aren’t related to the stock market so we weren’t impacted by the bear market of 2022, and we won’t have to worry about losses when the next market crash happens.

Of course, your results will be different because your policy will be custom-tailored to your unique situation, goals and dreams. To find out what your bottom-line numbers and results could be, request a free, no-obligation Analysis and Recommendations here:


My family is also using this policy to provide us with a guaranteed, predictable, tax-free income in retirement. You can learn more about how that works when you download this FREE Special Report, 5 Simple Steps to Bypass Wall Street, Fire Your Banker, and Take Control of Your Financial Future.

Reinvesting your dividends in a whole life insurance policy to purchase paid up additional life insurance is just one option typically available to you…

You can also:

  • Use your dividends to pay part or all of your annual premium
  • Let your dividends accumulate with interest
  • Take your dividends in cash
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What Are the Best Dividend-Paying Whole Life Insurance Companies?

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The companies that offer the best dividend-paying whole life policies should meet these three requirements, in addition to having paid dividends every year for at least the past 100 years:

1. They should offer “non-direct recognition” dividend-paying whole life policies, which simply means they credit you the exact same dividend even when you’ve taken a loan against your policy.

Having access to your cash value – to use when and how you see fit – is one of the most exciting living benefits of whole life insurance.

When you take a loan from a non-direct recognition whole life policy, it lets you use your money and still have it growing for you as though you never touched a dime of it!

2. The insurance company should be one of the financially strongest in the country. How do you determine that? A simple and effective way to gauge the strength of a life insurance company is to check their Comdex Ranking, which ranks companies based on the average of all ratings issued by the four main rating services. Look for a Comdex score of 95 or higher, which indicates the company is in the top 5% of all companies ranked.

3. The company should offer a flexible Paid-Up Additions Rider (PUAR).

Why is this important? You see, the policy I described above is not a “traditional” whole life policy. It is a high-cash-value, low-commission dividend-paying whole life policy that grows cash value significantly faster than the kind of whole life policies that Dave Ramsey, Suze Orman and most “experts” and financial representatives know about.

In these “supercharged” whole life policies, at least 50% of your premium will typically be directed into a Paid-Up Additions Rider, along with one other rider, that results in your policy having both more cash value and more death benefit over time. But some companies that offer this rider don’t give you much flexibility in paying for it, and others do. You want a company that gives you flexibility in paying into your PUAR.

CAUTION! This requires that the agent designing your policy be willing to accept a 50% or more commission cut, something not many of them are willing to do, unfortunately…

Rather than lose out on 50% or more of their commission, all too often financial representatives will try to talk you out of buying one of these supercharged whole life policies. They’ll spout some of the common myths and misconceptions, which we easily prove to be false in these two articles:

What the experts don’t know about supercharged whole life insurance – Part 1

What the experts don’t know about supercharged whole life insurance – Part 2

However, there are now approximately 200 life insurance professionals in the U.S. and Canada who are trained and authorized in this strategy and who will structure your dividend-paying whole life policy so it incorporates the key riders to your benefit. These agents also know the best life insurance companies to use that fit all the requirements listed above. (Because I am an educator and not a licensed financial representative, I’m prohibited from naming any specific companies.)

How to Get a Referral to an Agent Trained in Structuring High-Cash-Value, Low-Commission Dividend-Paying Whole Life Insurance Policies

When you work with a Bank On Yourself Professional, your policy will be structured to help you reach your long-term and short-term goals and dreams – without taking any unnecessary risks. And you’ll know the guaranteed minimum value of your policy on the day you want to tap into it – before you decide if it makes sense to proceed – so you can take a tax-free, predictable income in retirement.

And when you work with one of the Bank On Yourself Professionals, you can end up with more cash and value AND more death benefit – without paying a single penny more in premium!

To get a referral to one of these specially trained financial representatives who can also answer any questions you might have, request your free Analysis now here. There’s no cost, no obligation, and no arm-twisting. To get started on the path to a lifetime of true financial security and peace of mind, just click on this button:

Whole Life versus Universal Life and Indexed Universal Life – Which is Best?

One more thing and it’s important – no other type of permanent or cash value policy comes with as many guarantees and advantages as whole life insurance. The only part that’s not guaranteed is the dividend (which is why we recommend using a company with at least a 100 year track record of paying them).

Insurance PolicyToday, many agents are pushing indexed universal life and universal life, which can look good “on paper,” but in real life don’t hold up to their promises.  (They can show very unrealistic returns.  A whole life policy can only be illustrated at the guaranteed rate and the rate based on the current dividend.)

[See 7 Reasons to Be Wary of Indexed Universal Life Insurance]

Universal and variable life policies have an investment account wrapped up in them.  Most people already have way too much of their savings invested in the stock market, which is one big reason so many Americans are in the financial pickle they’re in today!

Although whole life insurance is not technically considered to be an investment, the rate of return of a properly structured Bank On Yourself-type policy is enviable – and doesn’t have the risk of stocks, real estate and other traditional investments. In fact, this video reveals how you would have to get a nearly 10% annual return in a tax-deferred plan like a 401(k) or IRA to equal the return of a properly structured dividend paying whole life insurance policy.

For a fair and unbiased comparison of the advantages of whole life versus universal and indexed universal life, check out these two articles:

Find Out How a High Early Cash Value, Low Commission Dividend-Paying Life Insurance Plan Lets You Take Back Control of your Financial Future…

A properly structured dividend-paying whole life policy gives you more advantages and guarantees than any other type of cash value life insurance policy or traditional retirement savings account.  No two policies are alike – yours would be custom tailored to your unique situation, goals and dreams.

Find out how much your financial picture could improve with a properly structured supercharged policy by requesting your FREE Analysis today!