Participating (par) life insurance policies are a type of life insurance that offers both a death benefit and significant potential for dividend earnings. The dividends earned inside par policies can be used in various ways to enhance the policy’s value and benefits. One such method is premium offset, a powerful strategy that can significantly benefit policy owners.
Participating insurance policies are life insurance policies that allow policyholders to share in the profits of the insurance company. These profits are distributed as dividends, which can be used in several ways:
• Cash Payout: Dividends can be received in cash.
• Premium Offset: Dividends can be applied to reduce or fully offset the annual premium.
• Dividend Accumulation: Dividends can be left to accumulate with interest.
• Purchase of Paid-Up Additions (PUAs): Dividends can be used to buy additional insurance coverage, which increases the policy’s cash value and death benefit.
• Loan Repayment: Dividends can be used to repay any outstanding policy loans.
WHAT IS PREMIUM OFFSET?
Premium offset is a strategy where the dividends generated by a participating insurance policy are used to pay the policy premiums. This can potentially eliminate the need for the policyholder to make out-of-pocket premium payments while maintaining the policy’s benefits.