What Is A Life Insurance Policy Dividend? 
A participating whole life insurance policy has the potential to generate an annual dividend . It can also have the potential to generate a terminal dividend at the surrender of the policy . Dividends are not guaranteed . A dividend is the return of unused premium to the policy owner . Because dividends are considered return of unused premiums , they are not taxed up to basis . Dividends can be taken in cash and used in a verity of internal policy rider applications : term insurance paid up additional insurance , to reduce premiums , to pay premiums , etc. . 