What Makes a Life Insurance Policy Participating?
Plain-English definition: A policy that may receive non-guaranteed policyholder dividends under the insurer's rules.
Eligibility to receive non-guaranteed dividends
A participating policy is eligible for insurer dividends under its terms. Eligibility does not guarantee that a dividend will be declared or equal the illustrated amount.
Participating does not mean owning company stock
Participating describes dividend eligibility. It does not mean the owner holds ordinary company stock or that every surplus amount is paid out.
Identify the dividend option and assumptions
- Separate guarantees from dividend assumptions
- Identify the selected dividend option
- Review how a dividend change affects the plan
Using dividends to buy additional insurance
A dividend purchases paid-up additions
A whole life policy may use declared dividends to buy paid-up additions. Lower future dividends would purchase less additional insurance than the current illustration shows.
Continue through dividend mechanics
Use participating life insurance and dividends to see how this definition affects a real policy decision.
Terms to read alongside participating policy
Sources for understanding participating policy
This page explains general insurance usage. State law, the issued contract and the insurer's current records control a specific policy. Use the sources below to verify general terminology, then check the exact policy language.