Whole Life Performance

[bill3173]

Just curious, do you know why insurance dividends are not taxable in the same manner as stock dividends?

Had a client ask me about that yesterday, and an overly simple answer would be that dividends represent an "over payment" for life insurance, rather than a participation in company profits. It's more like they're returning your money, hence it's not really income.

 

[rousemark]

Had a client ask me about that yesterday, and an overly simple answer would be that dividends represent an "over payment" for life insurance, rather than a participation in company profits. It's more like they're returning your money, hence it's not really income.

That was what the Supreme Court ruled.. I remember when all those of us who sold non par, especially the debit agents, carried a little card in our wallet that had the ruling printed on it. The ruling came about due to a challenge from the insurance companies. They are the ones that claimed it was a refund of excess premium in order to not have to pay premium taxes on that amount of premium.

"So the insurance company overcharges you for your insurance and then they give the overcharge back to you unless they decide they need it for some reason. Ain't that nice of them."