Whole life insurance dividends have long mystified both consumers and agents. We know that once per year, the mutuals and other companies that issue participating whole life insurance release press releases to announce the dividend payout for the following year. And usually (but not always…New York Life…) the companies will typically release what this payout means to the dividend interest rate.
And it's this dividend interest rate that causes so much confusion across parties. So how does it work, and what does it mean? When a company pays a 6% dividend, what is it paying 6% on?