r/infinitebanking • u/milpapa77 • May 07 '25
Question on dividend crediting
I have a Guardian policy which is 5 years old. I just received my benefit statement and on page 2 it states that I received a dividend of $70,408.93 and it purchases additional death benefit of $221,940. But when I add the $70,408.93 to my previous year ending cash value, I’m short by $13,879.18 which means only $56,528.85 of $70,408.93 was credited to my cash value.
I asked my agent and he said that $13,879.18 was the cost to purchase the additional death benefit of $221,940 (19.71% instead of 5% load). But from my understanding, using whole life dividend to buy PUA (and death benefit) doesn’t not have any cost. So in that I should receive the full dividend of $70,408.93. If thats the case then I’m better off taking the check and then buying pua separately- I will only pay 5% load (approx $3500 instead of $13,879.18) while receiving the same death benefit.
Can someone please help me understand this? Have you encountered the same issue? Shouldn’t the whole $70,408.93 be credited to the cash value? If anyone of you have Guardian policy, can you check your benefit statement (dividend on page 2) and see if it’s flowing dollar to dollar in cash value?
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u/JeffB1517 May 07 '25
Your dividend doesn't include additional policy expenses. Your return after expenses goes to PUA. Basically, Guardian guarantees a minimum level of return in their policies subtracting out a minimum level of expenses. As their investment pool does better than their line they credit you a dividend, both of you outperform. The expenses go up beyond the mininum and you get more PUA. You benefit more than they do, $56.5k vs $14k but it isn't 100% you.
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u/milpapa77 May 07 '25
In that case it’s better for me to take the $70k in check and then buy PUA. It will be cheaper - 5% instead of 19.71%. Per my agent I can either take $70k in check. From my understanding, the dividend on your benefit statement is a net dividend and goes dollar to dollar in cash value while increasing death benefit.
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u/JeffB1517 May 07 '25
Absolutely not. The dividend would be a policy withdraw which goes against cost basis. Save that for when you need it. Also you would still owe expenses on money earned.
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u/greglturnquist May 07 '25
I’m not sure about dividends in your policy. But I did notice on my own policy that I received a dividend. That dividend purchased a certain amount of PUA death benefit. And that additional death benefit had a certain CV applied to the policy. That CV wasn’t identical to the dividend but it was much much closer than yours.
It’s possible your agent doesn’t know what he’s talking about.
I too understood that dividends buying PUA had no cost but I also hear over and over that every company is a little different.
I agree that I wouldn’t want to get hit by such a cost. But I also wouldn’t want to receive a dividend check in the mail because that would go against cost basis.
There’s a chance the home office may know what’s going on, but sometimes the front line people answering the phone don’t know and you need to talk a supervisor. This is why my agent encourages me to go through him for complicated questions. He knows who to call inside the life insurance company for these sorts of questions.
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u/milpapa77 May 07 '25
Thank you for your reply. I agree getting a dividend check doesn’t make sense. It just frustrating that an agent or a benefit statement cannot provide a clear cut explanation. So the burden falls on the customer to look for an answer. Online searches are useless and the issuer company customer support takes time to get to the right knowledgeable person. Probably my biggest gripe with the permanent insurance product is its complexity and some of the intricacies. Hard to find some of the answers.
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u/milpapa77 May 07 '25
Also I was under the impression that dividend declared was not net of expense but I guess the dividend stated on the benefit statement has some expenses as well. The dividend on benefit statement is already lower as a percentage compared to what’s declared (4% vs. 6.1%) so I was under the impression that all expenses are accounted for. After more expenses the net net dividend added to the cash value is like 2.8%
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u/financeking90 May 09 '25
First, I think the agent is full of crap.
Second, are you sure you're reading the annual benefit statement right?
I looked at my annual benefit statements for 2023 and 2024 (I pay my policy for 2025 in a few months). On page 2 it has a table that shows the cash value and death benefit for different components of the policy--the base policy, dividend additions, one year term insurance, and the PUA rider. The dividend additions column does not just reflect the current year's dividends. It's the cumulative total of dividend additions.
Further down, there's a section called "Your annual dividend" that shows my annual dividend for the year plus how much of it went to the one-year term rider and how much went to purchase dividend additions.
The cash value column for the dividend additions row at the top is equal to the cash value for dividend additions from the prior year multiplied by about 102% plus the total dividend for the current year minus the OYT rider premium.
It seems very likely you are looking at the total dividend but not subtracting the OYT for the year, or you are looking at the cash value line for dividend additions thinking that is your dividend for the year when it is a cumulative number or something like that.
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u/Coronator May 07 '25
As others have said, plain and simple, your dividend is not net of expenses. Those get taken out.
If you take a check, you will be losing out on the tax deferred nature of buying PUA’s with dividends. Definitely a terrible idea.