Dividend Clarification

[Deepsea]

First off I am a newish career agent.

I have an interesting dividend question.

Now on a couple of Met polices that I have owned for over 20 years that I am now taking dividends out of-------Well I got an Inforce illustration and also an illustration if I use future dividends down the road------

It seems that the dividends are the same in the future whether I take out all the dividends now or leave them in to purchase paid up additions.

What I mean is that the dividends that the policy generates are based on the base policy and it doesn't seem to matter if you leave the dividends in the policy or take them in cash. Obviously if you take dividends in cash then those dividends can not buy additional life insurance.

But the amount of each years dividend does not seem at all to be based on how much in dividends you left in the policy. I thought you got paid dividends on dividends that remained inside the policy. Maybe it's just paid up additions that you earn dividends on dividends inside the policy. AND regular dividends don't earn dividends.

If that is the case then if you take dividends in cash then that would mean that this does not effect your subsequent future dividends, as those dividends are solely based on the basic policy only and of course the companies dividend rate minus expenses for that year.

Does this make sense ?

 

[DHK]

http://www.insurance-forums.net/for...ng-insurance/would-lie-t45091.html#post585619

Dividends are distributed to policyholders based on a number of factors: years in force and underwriting risk are two major factors in the preferential treatment of dividend distribution. A policy with Preferred Best underwriting and in force for 20 years will get a better dividend than a rated policy in force for 5 years.

 

[Deepsea]

http://www.insurance-forums.net/for...ng-insurance/would-lie-t45091.html#post585619

This would be correct.

Like I said I am a career agent for one of the big mutuals. HOWEVER, in a Met Life policy I own a Life 98------I noticed that each year my future illustrated dividends each year DON'T change if I take out dividends to offset premium in the future
or if I leave all the dividens in the policy.

Does Met treat this differently than most companies. I always thought I earned dividends on my dividends if I left them with the company.

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So if I wanted I could take out dividends to basis. And once basis is hit (limited pay policy).....leave dividens to buy more insurance or receive dividends in cash and pay tax on them----or borrow against my cash.

 

[DHK]

No, it's not unique. I can do the same thing with Assurity's whole life too. In fact, premium offset will still grow your dividends year over year, after it more than pays your premium.

Of course, I don't need to tell you that it's based on current dividend scale and they're not guaranteed to be the same.

Lots of options. Gotta love whole life!

 

[Deepsea]

Thanks for the reply DHK.

I always thought that taking my dividends in cash would reduce my future yearly dividends because I would not be earning dividends on my dividends, but it seems Met life doesn't work this way with their life 98.

Is this the same as Guardian 10 pay ? Or do your dividends earn dividends in this case ?

Thanks

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Me questions really has nothing to do with premium offset.

"Will depleting my policy of accumulated dividends have an effect on my yearly dividends going forward ?"

Or in other words do my accumulated dividends have an effect on my yearly dividends ?

 

[DHK]

I'm sorry, but I might've gotten this wrong. (Not the first time and I have a bit of a headache tonight.)

Just ran 2 illustrations based on my own life - age 36, standard underwriting, $100k whole life death benefit, same premium for both, with Assurity Life.

1st illustration: dividends paid out in cash from day 1
- By age 71 (year 35 of policy), the illustrated projected dividend was $985

2nd illustration: dividend to paid up additions from day 1
- By age 71 (year 35 of policy), the illustrated projected dividend was $1,647

Yes, the illustration will show a different projection.

Is it possible that the original illustrations you requested were done incorrectly?

 

[Deepsea]

I am thinking that maybe my Met policies do not earn dividends on dividends. While a policy from say Mass or Guardian will earn dividends on dividends.

Maybe it's possible that my 20 year old Met Life policy did not pay dividends on dividends.

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Maybe they were done incorrectly but I think that policy from met life didn't pay dividends on dividends.

 

[LGilmore]

what is your dividend election? because yes, depending on your election, your future dividends could remain relatively flat.

Also if you take your dividends as cash payout, there is no tax impact.