Who issues dividends paid from a life insurance policy?

Dividends paid from a life insurance policy are issued by the insurer. These dividends are a portion of the insurer's surplus, which may be distributed to policyholders as a result of favorable financial performance, lower claims, or other favorable factors affecting the insurer’s overall financial health.

Typically, mutual insurance companies, which are owned by their policyholders, are known for paying dividends because any profits they earn can be returned to the policyholders. In contrast, stock insurance companies may issue dividends in the form of stock or profits to their shareholders, but they do not usually declare dividends for policyholders in the same manner.

When a life insurance policy is structured to pay dividends, the insurer decides the amount and frequency of these payments based on its financial results and policies. This aspect reflects the insurer's commitment to its policyholders and serves as an indication of its financial strength and operational efficiency.