When you’re thinking about purchasing life insurance, disability insurance or any other insurance product, one of the things to consider is the company’s history of paying dividends.
What is a dividend?
Insurance companies set premiums and establish benefits based on a certain set of assumptions. Each year, if the company’s actual results turn out to be better than what was assumed, policyowners may share in those favorable results.
As a mutual company, Northwestern Mutual has no stockholders that share in any profits. Instead, policyowners share in the company’s results by receiving dividends.
But why do dividends matter?
They provide flexibility. For example, if you had a permanent life insurance policy that paid dividends, you could take the dividends in cash, use them to pay a portion or all of your premium or, like most policyowners, you could apply the dividends to your policy to increase the cash value and, often, the death benefit.
Dividends also provide better long-term value and help create a more financially secure future. No matter how you choose to use them, keep in mind that all dividends are not created equal.
So as you evaluate a company’s potential to pay dividends, ask about these areas of performance. Are they careful and consistent when making decisions about whom they insure? Are they diligent about keeping expenses low? How well have their investments performed?
Often when companies declare dividends, it’s this component—investment performance—that generates the most publicity.
But at Northwestern Mutual, we believe all three components are important measures of success. We also believe it’s why over 96 percent of our business stays with us year after year. And while dividends are not guaranteed, Northwestern Mutual has made a dividend payout every year since 1872. In fact, we lead the industry in total life and disability income insurance dividends, with record payouts to policyowners.1
We’re proud of our history of paying dividends and consider it a reflection of our commitment to provide the best possible long-term value to our policyowners.
1SNL annual statement data