Am I able to change my life insurance policy’s dividend option?

Some permanent life insurance policies offer dividend options, while others do not. A dividend option is your selection of how dividends earned against the policy will be handled. Options might include receiving a dividend check, applying the dividends toward future premiums, or simply allowing the dividend to ride so that the cash value of the policy increases faster. However, the first thing you must do is determine whether you have dividend options at all.

Read your policy. If dividend options are included, the available choices will be spelled out in the policy document. If you do not understand the wording or cannot find any specific references to dividend options, contact your agent or the insurance company's customer service department. Keep in mind that dividend options will only be available on policies attached to some form of savings vehicle. Term life policies and final expense insurance do not include financial tools of this sort, and will not provide you with any sort of dividend options.

If dividend options are included in your policy, you should also check to find out how often you are allowed to make changes and what those options are. Some policies will only allow you to change the dividend options at well-defined intervals, such as once a year, while other policies will allow you to make changes as often as you wish.

Which options are available can make a profound difference as well. For instance, applying the dividend to your premiums could relive a temporary monetary bind, while letting the dividends accumulate would not only increase the cash value of the policy by that amount, it would also cause the interest on the policy to go up faster because of the increased cash value. Choose the option which works best for your needs in the long run rather than accepting a small dividend check that will provide you with little or no personal benefit.