Non-Direct Recognition is a loan methodology used by some mutual insurance companies, where all policyholders get the same dividend rate for both the loaned and unloaned portions of their Whole Life cash value. This differs from Direct Recognition, where the company may pay a bigger or smaller dividend for portions of your cash value with loans against it.
It’s worth noting that mutual companies offering Non-Direct Recognition loans will pay the same dividend on both the loaned and non-loaned portion of cash values. In theory, that means that non-borrowing policyholders will essentially subsidize any “below market” loans, and borrowers taking “above market” loans subsidize the dividends for all non-borrowers by paying a higher rate. In practice, Non-Direct Recognition companies either nimbly adjust their loan rate accordingly and/or pay lower ongoing dividends to all policyholders to subsidize the excess cheap money borrowing.
Learn more about Direct Recognition vs. Non-Direct Recognition here.