Some insurers, particularly mutual insurers, offer dividends to policyholders if the sale of auto insurance has been profitable to them. Dividends are declared and paid after the policy expiration and thus normally paid at renewal time.
Mutual insurance companies pay dividends on policies. With mutual insurance companies the ownership is with the policyholders so they receive the dividend when the company does well. Non-mutual insurance companies, such as publicly traded stock companies and mutual holding companies, also may pay dividends on what are termed participating policies.
Not all insurance companies pay dividends, nor do all insurance policies. Whether or not you receive a dividend on your insurance policy normally depends certain factors that affect the insurance company. The main factors that insurance providers, that give out policyholder dividends, look at are their claims, expenses and than their investment/financial performance.
An insurance company predicts how many claims it will have each year by looking at its own claim history. If your insurance carrier pays out less claims than they anticipated you may receive a dividend. As with any business there are expenses for running an insurance company.If your insurance carrier ends up spending less than they predicted than it helps the chances of a dividend being received by policyholders.
A company also examines their investment and financial performance. As you may be aware insurance companies invest money to try and up their reserves. If their investments perform favorably than the policyholders have a better chance that a dividend will be given
If on the other hand an insurance company does not perform well financially in these 3 area (meaning they have more claims, more expenses and poor investment performance) than it is less likely that a dividend will be paid out.
To receive a policy dividend, you must be a policyholder on the date your insurance company declares a dividend. So if you bought a policy from your insurer in September, and the insurer declared a dividend in June, you should not expect to get a check. Most insurance companies pay dividends to policyholders just before their renewal dates comes up.
If you are insured by a stock subsidiary of a mutual insurance company you may not receive dividends. For instance State Farm Mutual Automobile Insurance Company (obviously a mutual insurance co.) pays dividends on auto insurance policies, but State Farm Fire and Casualty Company (a stock subsidiary) does not pay dividends on homeowner's policies.
Not even all mutual insurance companies pay dividends so if it is important to you that dividends may be paid out to you if your company is doing well ask if dividends are paid out. Some mutual companies will charge lower premiums if they are doing well instead of paying out dividends.
Typically if your insurance company issues you a dividend, you can receive it in check form or put it towards your premium amount. Luckily your own claim record does not affect your ability to get a dividend. So if you have accidents and tickets on your driving record you would still receive a dividend just as a person with a clean driving record and with no claims against their policy would.
If you are interested in getting your insurance through an insurance company that pays out policyholder dividends make sure to ask the insurance agent about this when getting your quote. Make sure you are getting information about a policyholder dividend and not a stock dividend.
The policyholder dividend as we explained about above allows you to receive money if the insurance company has done well financially (has lower claims and expenses and done well with investments basically). A stock dividend is one given by a publicly traded stock company. In order to receive this type of dividend from an auto insurance company you would need to buy stock and thus be a stockholder and do not need to be a policyholder with that insurer in order to get a stock dividend.
There are too many insurance companies that offer dividends to list but to name a few - USAA, Progressive, State Farm Mutual Automobile Insurance Company, Texas Mutual Insurance Company, New Jersey Manufacturers Insurance Company and Amica. Many insurance companies that offer dividends offer both a dividend insurance policy and a non-dividend policy type.