How Does Dividend Paying Whole Life Insurance Work?

Dividend-paying whole life insurance, which is often referred to as “participating whole life insurance“, allows the policyowner to benefit from the insurer’s financial success.

If the insurance company posts above-expected profits, it will determine whether the excess cash is needed for operations. If not, they will share the surplus profit with the policyholders via a dividend payment.

There is no guarantee (with any company) that a dividend will be paid. Furthermore, depending on the insurer, dividends can be paid out annually, quarterly, or biannually.
While not guaranteed, dividends should be expected. Historically, there have only been two occasions when insurers didn’t pay dividends (during the Great Depression and during the 2008 housing crisis).

All dividend-paying life insurance policies are whole life insurance plans. For that reason, you can rest assured that the premiums will never increase, that the cash value will accrue over time, and that the coverage lasts indefinitely.

Upon the insured’s death, the insurance provider will pay the net death benefit directly to the beneficiaries. There are no restrictions on how that money is spent.

Don't Forget
Only mutual insurance companies offer dividend paying policies.

 

How The Dividend Payments Can Be Used

If a dividend is payable, you can opt to use the money in the following ways:

  • Cash payment: The insurer will mail you a check. You’re free to spend the money however you see fit.
  • Loan repayment: If you have an outstanding policy loan, you can assign all or a portion of the dividend to pay down the loan.
  • Increase the death benefit: There is generally an option to purchase “paid up additions” (PUAs). In layman’s terms, the dividend money is used to buy additional fully paid-up life insurance, which increases the death benefit of your policy. The additional coverage lasts forever, costs nothing, and does not increase your current planned premium.
  • Cash value growth: You can reinvest dividends in the policy to increase the cash value, which drives further interest accrual.
  • Cover premium payments: The money can be assigned to pay your policy’s premiums.

 

Under What Circumstances Are Dividends Payable?

A dividend will be declared only if the insurer posts sufficient profit for the qualifying period. This could be the result of paying fewer claims than expected, of their investments outperforming expectations, or of operational efficiencies that drove down costs without sacrificing profitability.

Ultimately, the board of directors will review its balance sheet and determine whether it has more money than needed to cover its operational and risk expenses. When there is sufficient surplus, a dividend payment will be announced to eligible policyholders.

 

How Much Does A Dividend-Paying Whole Life Insurance Policy Cost?

The cost of participating in whole life insurance is based on many factors, such as your age, gender, state of residence, tobacco use, health history, and the amount of coverage you choose.

AgeFemaleMale
40$182$220
45$200$232
50$214$276
55$248$328
60$304$412
65$384$540
70$506$720
75$698$974
80$958$1,372
85$1,334$1,902
Monthly rates are calculated at a preferred non-tobacco rating, rounded to the nearest dollar, and are valid as of 03/09/2026.
AgeFemaleMale
40$253$297
45$318$366
50$391$455
55$511$585
60$664$761
65$867$992
70$1,193$1,364
75$1,736$1,956
80$2,323$2,567
85$2,903$3,261
Monthly rates are calculated at a preferred non-tobacco rating, rounded to the nearest dollar, and are valid as of 03/09/2026.
AgeFemaleMale
40$496$583
45$624$719
50$768$895
55$1,006$1,152
60$1,310$1,450
65$1,711$1,958
70$2,356$2,694
75$3,431$3,867
80$4,593$5,076
85$5,741$6,451
Monthly rates are calculated at a preferred non-tobacco rating, rounded to the nearest dollar, and are valid as of 03/09/2026.
AgeFemaleMale
40$985$1,160
45$1,242$1,431
50$1,531$1,783
55$2,006$2,298
60$2,613$2,994
65$3,416$3,909
70$4,705$5,382
75$6,857$7,727
80$9,180$10,147
85$11,477$12,896
Monthly rates are calculated at a preferred non-tobacco rating, rounded to the nearest dollar, and are valid as of 03/09/2026.

 

Example Dividend Whole Life Insurance Policies

Below are two sample whole life policies that pay dividends. In these cash value charts, you can see how the cash value increases over time, the dividends, and the expected death benefit.

 

$250,000 dividend-paying whole life insurance policy

End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 31)		Female$2,113$0$0$250,000
Male$2,420$0$0$250,000
5
(age 35)		Female$2,113$300$5,441$256,210
Male$2,420$351$6,410$256,469
10
(age 40)		Female$2,113$474$18,052$266,785
Male$2,420$544$20,648$267,376
15
(age 45)		Female$2,113$669$33,884$280,850
Male$2,420$767$38,442$281,864
20
(age 50)		Female$2,113$898$53,868$298,207
Male$2,420$1,024$60,681$299,829
25
(age 55)		Female$2,113$1,169$78,870$318,886
Male$2,420$1,335$88,237$321,329
30
(age 60)		Female$2,113$1,477$109,814$342,992
Male$2,420$1,659$122,235$346,310
35
(age 65)		Female$2,113$1,835$148,132$370,559
Male$2,420$2,053$164,076$374,756
40
(age 70)		Female$2,113$2,247$195,081$401,838
Male$2,420$2,507$214,479$407,108
45
(age 75)		Female$2,113$2,739$251,849$437,145
Male$2,420$3,057$274,077$443,809
50
(age 80)		Female$2,113$3,327$318,294$477,109
Male$2,420$3,673$342,200$485,537
55
(age 85)		Female$2,113$3,977$392,752$522,471
Male$2,420$4,341$417,973$532,810
60
(age 90)		Female$2,113$4,699$471,848$574,015
Male$2,420$5,072$496,894$586,475
End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 41)		Female$3,042$0$0$250,000
Male$3,570$0$0$250,000
5
(age 45)		Female$3,042$467$9,165$256,877
Male$3,570$546$10,652$257,281
10
(age 50)		Female$3,042$718$27,714$268,662
Male$3,570$829$31,508$269,683
15
(age 55)		Female$3,042$1,010$50,808$284,219
Male$3,570$1,154$57,442$285,923
20
(age 60)		Female$3,042$1,358$79,445$303,486
Male$3,570$1,548$89,316$306,075
25
(age 65)		Female$3,042$1,748$114,668$326,520
Male$3,570$1,986$128,111$330,169
30
(age 70)		Female$3,042$2,192$157,824$353,347
Male$3,570$2,482$174,816$358,327
35
(age 75)		Female$3,042$2,723$210,021$384,230
Male$3,570$3,080$230,060$390,886
40
(age 80)		Female$3,042$3,358$271,159$419,767
Male$3,570$3,750$293,268$428,502
45
(age 85)		Female$3,042$4,060$339,763$460,673
Male$3,570$4,476$363,691$471,654
50
(age 90)		Female$3,042$4,839$412,835$507,702
Male$3,570$5,272$437,242$521,177
End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 51)		Female$4,693$0$0$250,000
Male$5,460$0$0$250,000
5
(age 55)		Female$4,693$758$15,067$258,137
Male$5,460$879$17,299$258,622
10
(age 60)		Female$4,693$1,140$42,815$272,022
Male$5,460$1,316$48,369$273,326
15
(age 65)		Female$4,693$1,597$76,813$290,310
Male$5,460$1,821$86,288$292,540
20
(age 70)		Female$4,693$2,116$118,237$312,946
Male$5,460$2,407$131,851$316,404
25
(age 75)		Female$4,693$2,717$168,025$340,096
Male$5,460$3,113$185,077$345,349
30
(age 80)		Female$4,693$3,428$226,355$372,160
Male$5,460$3,877$245,837$379,750
35
(age 85)		Female$4,693$4,213$291,870$409,839
Male$5,460$4,699$313,617$419,968
40
(age 90)		Female$4,693$5,083$361,815$453,870
Male$5,460$5,600$384,571$466,846
End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 61)		Female$7,972$0$0$250,000
Male$9,127$0$0$250,000
5
(age 65)		Female$7,972$1,346$25,087$260,606
Male$9,127$1,518$28,633$261,189
10
(age 70)		Female$7,972$1,914$67,778$278,463
Male$9,127$2,256$76,086$280,383
15
(age 75)		Female$7,972$2,695$119,106$301,731
Male$9,127$3,080$131,411$305,604
20
(age 80)		Female$7,972$3,570$178,082$331,079
Male$9,127$4,049$194,253$337,220
25
(age 85)		Female$7,972$4,476$243,916$366,754
Male$9,127$5,064$263,174$375,808
30
(age 90)		Female$7,972$5,475$314,196$409,300
Male$9,127$6,115$335,234$421,729
End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 71)		Female$14,316$0$0$250,000
Male$16,364$0$0$250,000
5
(age 75)		Female$14,316$2,465$43,683$264,828
Male$16,364$2,860$47,654$266,291
10
(age 80)		Female$14,316$3,717$110,807$290,875
Male$16,364$4,172$121,076$294,174
15
(age 85)		Female$14,316$5,058$184,545$325,620
Male$16,364$5,650$200,869$331,546
20
(age 90)		Female$14,316$6,361$261,441$369,641
Male$16,364$7,258$280,792$379,661

Premiums are calculated at a non-tobacco preferred rating, rounded to the nearest dollar, and are valid as of 03/09/2026.

 

$1,000,000 dividend-paying whole life insurance policy

End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 31)		Female$8,140$0$0$1,000,000
Male$9,347$0$0$1,000,000
5
(age 35)		Female$8,140$17,107$21,763$1,024,841
Male$9,347$1,404$25,642$1,025,878
10
(age 40)		Female$8,140$57,510$72,206$1,067,139
Male$9,347$2,178$82,593$1,069,504
15
(age 45)		Female$8,140$103,976$135,534$1,123,401
Male$9,347$3,067$153,767$1,127,454
20
(age 50)		Female$8,140$157,756$215,470$1,192,825
Male$9,347$4,097$242,723$1,199,316
25
(age 55)		Female$8,140$219,213$315,480$1,275,545
Male$9,347$5,340$352,947$1,285,318
30
(age 60)		Female$8,140$288,354$439,257$1,371,967
Male$9,347$6,637$488,940$1,385,241
35
(age 65)		Female$8,140$366,284$592,529$1,482,235
Male$9,347$8,210$656,302$1,499,024
40
(age 70)		Female$8,140$452,656$780,322$1,607,352
Male$9,347$10,029$857,915$1,628,430
45
(age 75)		Female$8,140$546,397$1,007,394$1,748,578
Male$9,347$12,228$1,096,306$1,775,234
50
(age 80)		Female$8,140$642,606$1,273,176$1,908,433
Male$9,347$14,691$1,368,798$1,942,148
55
(age 85)		Female$8,140$733,746$1,571,005$2,089,883
Male$9,347$17,364$1,671,890$2,131,238
60
(age 90)		Female$8,140$810,909$1,887,389$2,296,058
Male$9,347$20,289$1,987,577$2,345,897
End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 41)		Female$11,825$0$0$1,000,000
Male$13,925$0$0$1,000,000
5
(age 45)		Female$11,825$29,624$36,658$1,027,508
Male$13,925$34,350$42,610$1,029,124
10
(age 50)		Female$11,825$88,515$110,858$1,074,647
Male$13,925$100,085$126,030$1,078,730
15
(age 55)		Female$11,825$155,411$203,231$1,136,875
Male$13,925$174,830$229,768$1,143,692
20
(age 60)		Female$11,825$230,985$317,779$1,213,944
Male$13,925$258,119$357,265$1,224,299
25
(age 65)		Female$11,825$315,073$458,673$1,306,079
Male$13,925$349,265$512,445$1,320,677
30
(age 70)		Female$11,825$408,274$631,297$1,413,389
Male$13,925$447,504$699,264$1,433,308
35
(age 75)		Female$11,825$509,433$840,085$1,536,920
Male$13,925$550,274$920,242$1,563,545
40
(age 80)		Female$11,825$613,273$1,084,634$1,679,067
Male$13,925$651,344$1,173,070$1,714,008
45
(age 85)		Female$11,825$711,689$1,359,052$1,842,691
Male$13,925$745,631$1,454,764$1,886,615
50
(age 90)		Female$11,825$795,172$1,651,339$2,030,806
Male$13,925$821,478$1,748,969$2,084,709
End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 51)		Female$18,367$0$0$1,000,000
Male$21,401$0$0$1,000,000
5
(age 55)		Female$18,367$48,895$60,266$1,032,546
Male$21,401$56,012$69,197$1,034,488
10
(age 60)		Female$18,367$135,523$171,260$1,088,088
Male$21,401$152,231$193,475$1,093,305
15
(age 65)		Female$18,367$231,605$307,252$1,161,239
Male$21,401$258,562$345,150$1,170,160
20
(age 70)		Female$18,367$337,110$472,948$1,251,786
Male$21,401$373,076$527,404$1,265,616
25
(age 75)		Female$18,367$450,164$672,098$1,360,383
Male$21,401$489,922$740,308$1,381,395
30
(age 80)		Female$18,367$566,239$905,418$1,488,640
Male$21,401$604,115$983,346$1,518,998
35
(age 85)		Female$18,367$676,321$1,167,479$1,639,354
Male$21,401$710,693$1,254,468$1,679,871
40
(age 90)		Female$18,367$769,937$1,447,258$1,815,479
Male$21,401$796,620$1,538,284$1,867,382
End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 61)		Female$31,355$0$0$1,000,000
Male$35,923$0$0$1,000,000
5
(age 65)		Female$31,355$80,443$100,346$1,042,422
Male$35,923$91,756$114,531$1,044,757
10
(age 70)		Female$31,355$209,689$271,112$1,113,851
Male$35,923$233,730$304,343$1,121,533
15
(age 75)		Female$31,355$348,994$476,424$1,206,923
Male$35,923$379,630$525,646$1,222,415
20
(age 80)		Female$31,355$487,213$712,329$1,324,314
Male$35,923$522,086$777,012$1,348,880
25
(age 85)		Female$31,355$616,896$975,663$1,467,016
Male$35,923$650,202$1,052,697$1,503,231
30
(age 90)		Female$31,355$727,539$1,256,783$1,637,198
Male$35,923$753,583$1,340,937$1,686,916
End Of
Policy Year		GenderAnnual PremiumExpected
Annual Dividend		Total Expected
Cash Value		Total Expected
Death Benefit
1
(age 71)		Female$56,461$0$0$1,000,000
Male$64,588$0$0$1,000,000
5
(age 75)		Female$56,461$138,207$174,733$1,059,311
Male$64,588$147,834$190,615$1,065,165
10
(age 80)		Female$56,461$329,737$443,227$1,163,499
Male$64,588$355,193$484,305$1,176,696
15
(age 85)		Female$56,461$505,811$738,181$1,302,482
Male$64,588$542,588$803,477$1,326,184
20
(age 90)		Female$56,461$648,281$1,045,765$1,478,562
Male$64,588$679,694$1,123,166$1,518,644

Premiums are calculated at a non-tobacco preferred rating, rounded to the nearest dollar, and are valid as of 03/09/2026.

 

Are There Any Taxes Due On Dividend Payments?

In nearly every case, life insurance dividend payments won’t create a tax liability. That’s because the IRS considers dividend payments as a return of unused premiums.

The only time dividends would be considered income and thus subject to income taxes would be if the dividend amount were greater than the cumulative policy premiums you’ve paid. That scenario is virtually never going to happen.

 

Dividend Paying Whole Life Insurance Vs Non-Dividend Paying Policies

Policy FeaturesDividend-Paying
Whole Life		Dividend-Paying
Whole Life
Possibility of dividend paymentsYesNo
Insurer's profitsShared with the policyownersKept by the insurer
AffordabilityHigher costLower cost
Fixed premiumsYesYes
Coverage lengthForeverForever
Builds cash valueYesYes
Can borrow from the cash value at any timeYesYes
Death benefit guaranteed never to decreaseYesYes

 

Is Dividend-Paying Life Insurance A Good Idea?

If you’re interested in whole life insurance (for any reason), buying a dividend-paying policy is a good idea for the following reasons:

  • Worth the additional expense: Although more expensive, the additional cost is modest. The dividend payments (in particular, how you can use them) are well worth the additional cost.
  • Asset accumulation: The cash value will continue to grow and be accessible at any time. Furthermore, the cash value can be used as collateral for loans, withdrawn and spent however you like, or reinvested into the policy for additional growth.
  • Tax-free cash: If you opt for cash dividend payments, the money you get is not income and thus not subject to income taxes.

Ultimately, there are multiple types of life insurance that all function differently and have unique pros and cons. It’s wise to evaluate all of them to ensure you’re choosing the best type to accomplish your goals.

 

Frequently Asked Questions

You’re not required to report a life insurance dividend payment to the IRS because, generally speaking, it’s not income. However, if your dividend payments exceed the total amount you’ve contributed to the policy, they would be considered income. In that circumstance, you would indeed need to report it to the IRS.

Borrowing from the cash value (often referred to as a policy loan) will indeed reduce dividend payouts. That’s because when the insurer calculates the amount payable for dividends, the current cash value is a key figure in the formula. The lower the cash value, the lower the dividend payment.

Not all whole life insurance policies pay dividends. Only participating whole life policies (also known as “dividend-paying whole life”) can pay dividends.

Anthony Martin
Anthony Martin
Choice Mutual CEO & Writer
Author
  • Nationally licensed life insurance agent with over 16 years of experience.
  • Personal annual production that puts him in the top .001% out of all life insurance agents in the nation.

Anthony Martin is a nationally licensed insurance expert with over 16 years of experience and has personally served over 10,000 clients with their life insurance needs. He frequently authors entrepreneurial and life insurance content for Forbes, Inc.com, Newsweek, Kiplinger, and Entreprenuer.com. Anthony has been consulted as an expert life insurance source for dozens of high-profile websites such as Forbes, Bankrate, Reuters, Fox Business, CNBC, Investopedia, Insurance.com, Yahoo Finance, and many more.

Jeff Root
Jeff Root
Life Insurance Expert, Choice Mutual Fact Checker
Editor
  • Nationally licensed life insurance agent with over 20 years of experience
  • Best selling Amazon author.

Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.

David Duford
David Duford
Life Insurance Expert, Choice Mutual Fact Checker
Editor
  • Nationally licensed life insurance agent with over 15 years of experience
  • Best selling Amazon author of five insurance sales books.

David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.

Jeff Root
Jeff Root
Life Insurance Expert, Choice Mutual Fact Checker
Editor
  • Nationally licensed life insurance agent with over 20 years of experience
  • Best selling Amazon author.

Jeff Root is a nationally licensed life insurance expert with over 20 years of experience. He has personally helped over 3000 clients with their life insurance needs. Jeff is a best-selling Amazon author and the managing partner of a highly successful insurance brokerage that manages over 2,500 licensed insurance agents across the USA. He has been a featured life insurance source for prestigious websites such as Forbes, Bloomberg, MarketWatch, Nerdwallet, and many more.

David Duford
David Duford
Life Insurance Expert, Choice Mutual Fact Checker
Editor
  • Nationally licensed life insurance agent with over 15 years of experience
  • Best selling Amazon author of five insurance sales books.

David Duford is a nationally licensed insurance expert with over 15 years of experience. He has personally helped more than 15,000 clients buy life insurance. David has been featured as an expert source for highly authoritative publications such as A.M. Best and Insurancenewsnet. He also runs one of the largest Youtube channels to help aspiring insurance agents serve their clients better.

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