ANNUAL DIVIDEND - INSURANCE

In the context of the insurance industry, it is a payment handed over by an insurance company to one of the policyholder. Annual dividends are most often distributed in conjunction with disability income insurance and life insurance policies. The insurance companies may pay their customers an annual dividend once the company's experience(paid claims) and operating expenses, investment returns within a particular year are better than the expected. The dividend amounts constantly changes every year and are not guaranteed.

The calculation of annual dividends depends on the guaranteed cash value of the individual insurance policy; its annual premium; the actual mortality, dividend scale interest rate, and expense cost of the company. Insurance companies must make sure that premiums that they are earning are enough to cover their reserves, contingencies and expenses, but they may pick to share a surplus with their customers. The policyholders that borrowed in contrast of their policies may receive a reduced annual dividends while the loan will be outstanding.

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