If you have whole life insurance, you probably got it to ensure your loved ones will be provided for after your death, as well as the additional perks like cash value. Whole life insurance can be a sound way to plan for your family’s future—in fact, some whole life insurance policies can also pay out dividends.
If you’re receiving dividends and looking for ways to put them to good use, here are some ideas to maximize their impact.
Save all (or some) of it.
If you don’t want to spend your dividends right away, you might want to put them into a savings account or certificate of deposit to earn some interest. Receiving dividends can also be a good opportunity to build up your emergency fund. Or, if you’re working toward a specific financial goal, like a down payment for a vacation home or a new car, an infusion of cash can help you get ahead in saving for these things.
Put it back into your policy.
You can use your dividends to help pay for your premiums, making your monthly payments a bit smaller. Alternatively, you can use the dividends to purchase additional paid-up insurance, increasing your coverage. The specifics of how this works will depend on your individual policy.
Take a vacation
Over time, dividends add up–so why not use them to treat yourself to a vacation? Receiving dividends can be the perfect opportunity to plan that trip you’ve been thinking about without dipping into your existing savings.
Pay for home renovations.
Home projects can take a bite out of your savings. Fortunately, the dividends from a whole life insurance policy can give you a way to help finance those renovations. So, if you’ve been thinking about getting a new roof, retiling the bathroom, or refinishing your hardwood floors, over time, your dividend payments might supply some of the funds needed to move forward with a home project.
Invest in yourself
Dividends probably weren’t your priority when you were shopping for life insurance—life insurance is a way to look after the people you care about. That said, making good use of your policy’s benefits can help set you up for further success later on. Dividends can be the perfect way to invest in yourself. This may mean paying for a further education class, putting the money toward tuition, going to a conference, or just doing things that help you rest and recharge.
Use Them for Premium Payments
When you purchase a life insurance policy, you agree to pay regular premiums to keep the policy in force. These premiums are usually paid on a monthly or annual basis, and their amount is based on several factors, such as your age, health, and the coverage amount you have chosen.
One of the ways you can use your life insurance dividends is to apply them toward your premium payments. Doing so can reduce or even eliminate the amount of money you need to pay out of pocket for your premiums. This can be particularly helpful if you’re on a tight budget or if you’re looking to save money on your life insurance policy.
Pay Off Debts or Invest Elsewhere
Another way you can spend your life insurance dividends is to use them to pay off debts or invest them elsewhere.
Paying off debts can be a great way to use your dividends, especially if you have high-interest debt such as credit card debt or a personal loan. Using your dividends to pay off debt can save you money in the long run by reducing the amount of interest you have to pay.
Investing your dividends elsewhere can also be a smart financial move. You can use them to invest in stocks, mutual funds, or other investment vehicles that have the potential to generate higher returns than your life insurance policy.
Conclusion
Not every policy is going to give you dividends. But if you are lucky enough to get dividends, then make sure you use one of our ways to use them for a better life.
