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Tontine

dividends policy pay money

An organization of individuals who enter into an agreement to pool sums of money or something of value other than money, permitting the last survivor of the group to take everything.

The holders of tontine life insurance contracts enter into an agreement to pay premiums for a certain amount of time before they gain the right to acquire dividends. In the event that a policyholder dies during the tontine policy, his or her beneficiary will be entitled to benefits, but no dividends. The earnings that ordinarily would be used to pay dividends are accumulated during the tontine period and subsequently given only to policyholders who are still alive at the end of the term. This type of policy is known as a dividend-deferred policy. A number of states proscribe such policies.

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