Consumer Comparisons of Life Insurance Costs

The second step in calculation of the net payment cost index is: Calculate the future value of an ordinary annuity of an amount equal to the projected annual dividend (if any), compounded at 5% for 20 years. An ordinary annuity is used because dividend payments are made at the end of the period.

What is the projected annual dividend? Does a life policy pay any dividend annually?

A participating policy will pay dividends. It must be specified in the contract.

This are dividends for the insurance company and not charged to the insured, right?