Infinite Banking eCourse > Lesson 5
Dividends
Lesson 5 of 9 · About a 4-minute read · By Lane Kawaoka, PE · Updated November 2026
Short answer
A mutual insurer’s dividend has a guaranteed part and a part that depends on how the company did that year. What your own policy earns after insurance costs and expenses is usually below the company’s headline dividend rate. Compare policies on the net numbers in the illustration, not the advertised rate.
Insurance Company Dividend Rate
The company’s listed dividend rate is made up of the guaranteed rate and the nonguaranteed rate.
The guaranteed rate always will be paid, while the nonguaranteed rate is based on the company’s performance that year.
Net Internal Rate of Return (IRR) – What You’re Actually Getting
You can expect to receive between 1-2% less than the listed company dividend rate due to the following factors:
Your net IRR is the company’s listed dividend rate less mortality and admin/insurance expenses.
Knowing this is important so you don’t pick a company based on their listed dividend rate.
Large vs Small Insurance Company
Large companies typically have a proven track record and systems and processes already in place which reduces variability.
Smaller companies may take more risks or provide attractive features to draw clients, however, those may not be permanent features or features good for the overall insurance company/client.
Changes for Whole Life Insurance Policies – 7702 Rule
With the 7702 Rule in effect, the guaranteed 4% interest rate no longer applies, in the video below we go over some of the potential impacts, this rule brings to whole life insurance policies.
FAQs
Where do insurance companies invest their money, how do they pay their dividends?
In the 1980’s insurance companies used to invest in bonds, nowadays companies are investing in high-end commercial real estate, multi-family real estate, and cash flowing businesses.
What if the stock market crashes?
The top insurance companies have been paying a dividend for over a 100 years through many downturns in the economy, a small percentage of their holdings are in stocks.
Key takeaways
- Dividends are not guaranteed. Only the guaranteed part of the contract is.
- Net growth on your cash value is usually below the listed dividend rate because of insurance costs and expenses.
- Since 2021, the interest rate used in the Section 7702 calculations follows market rates instead of a fixed 4%. Ask how that affects any illustration you are shown.
Talk it through with us
Comparing insurers or illustrations? Hear how other accredited investors in our community look at the numbers. Join The Wealth Elevator investor community and book your onboarding call with us.
Join the club and book your onboarding callJoining is free.
The podcast behind this course
The Wealth Elevator Podcast
Conversations for accredited investors on alternative investments, tax strategy and infinite banking, the three legs of how I build wealth.
This is educational content, not investment, tax, legal or insurance advice. We are not attorneys, CPAs, financial planners or licensed insurance agents. Policy features, dividends and costs vary by insurer and design, and dividends are not guaranteed. Tax law changes and results depend on your situation; consult your own CPA, attorney and a licensed insurance professional. Private investments are illiquid and carry risk, including loss of capital. Offerings are available only to accredited investors and only through offering documents. Please let us know if you need a referral to a 💼 CPA, ⚖️ lawyer or other vendor here.