Getting the Most Out of Insurance Dividend Plans

My insurance pays dividends. Sounds like a good idea. Some insurance companies offer “dividend plans” that allow a policyholder to obtain dividends from the insurance company, often based on the loss experience under the policyholder's insurance program. If losses are low, the insurance company promises to pay the policyholder dividends. Dividend plans do have their pitfalls, however, as a number of Kemper policyholders have discovered. In an undated letter to policyholders, Michael A. Coutu, the acting president and chief executive officer of the Kemper Insurance Companies, stated that as a result of Kemper's financial condition, Kemper “will not declare any dividends in the foreseeable future” meaning that “a payment due Kemper may be larger than anticipated or that a return or credit may be less than expected, despite underlying losses.” As a result, these “loss-sensitive” dividend plans have not always performed as expected.