What Is A Life Insurance Dividend? 
A life insurance dividend by IRS definition is a `` return of overpaid premium '' that can occur with mutual companies . Mutual companies are policyholder owned , no stock , no stock holders . What the `` dividend '' is made up of isa combination of investment returns , death claims not paid and overhead expenses not used above and beyond what the companyneeds to function and maintain reserves . The IRS considers it excess premium so it allows for it 's return to policyholders without taxing it . 