What's the difference between whole life insurance and dividend insurance?

Whole life insurance and dividend insurance are two different insurance products. Although both belong to the field of life insurance, there are obvious differences in the protection methods and benefits between them. The following are the main differences between them:

I. Scope of protection

Whole life insurance provides life-long guarantee, and the insurance company will pay a certain amount of insurance money to the beneficiary whenever the insured dies. It mainly focuses on providing death risk protection and providing financial support for the families or beneficiaries of the insured.

Dividend insurance also provides lifetime protection, but compared with whole life insurance, it provides an additional cash value account. This cash value is accumulated from the net premiums of policies invested in asset classes designated by insurance companies. The insured can choose to use cash value to pay premiums, borrow money or as a source of funds for retirement planning.

Therefore, whole life insurance focuses on providing basic death protection, while dividend insurance allows the insured to accumulate cash value while providing protection.

Second, income.

Whole life insurance's income mainly comes from the insurance premium paid by the insurance company at the time of the insurance accident. This kind of insurance premium is usually stipulated in the contract and is part of the insured amount. Therefore, whole life insurance's income is relatively fixed.

The income of dividend insurance comes from the operating results of insurance companies. The insurance company will distribute part of the profits to the insured, which is usually agreed in the contract. Because of the uncertainty of the operating results of insurance companies, there is also some uncertainty in the income of dividend insurance.

Third, the cost

There are also some differences between whole life insurance and dividend insurance. Whole life insurance's cost is relatively low, mainly because its guarantee mode is relatively simple. Dividend insurance is relatively expensive because it has extra dividend income.

Fourth, the return on investment

Whole life insurance mainly pays attention to risk protection, so the return on investment is low. The insurance company will use the premium for the compensation and operation management of the guarantee responsibility, and the remaining funds may be used for long-term fixed-income investments, such as bonds or other low-risk investment tools. Because insurance companies have restrictions on investment risks, the return on investment of the insured in whole life insurance is usually relatively stable but relatively low.

Dividend insurance requires the insured to bear certain investment risks. Insurance companies use premiums for the payment of security responsibilities, operation management and investment operations. If the investment performance is good, the insurance company can pay part of the income to the insured as a policy dividend. However, if the investment performance is poor, the policy dividend may be reduced or even absent. Therefore, there is some uncertainty in the investment return of dividend insurance.

In a word, the main difference between whole life insurance and dividend insurance lies in the way of protection and income. Whole life insurance provides pure death protection with relatively fixed income; Dividend insurance provides death protection and certain income, and the income is uncertain. When consumers buy these two insurance products, they need to choose according to their own needs and actual conditions.

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