- A participating policy is an insurance contract that pays dividends to the policy holder.
- Participating life insurance provides a combination of permanent life insurance (whole life insurance) protection and an opportunity for tax-preferred cash value growth. The base insurance protection is guaranteed for life, as long as you pay the premiums on time.
- Dividends are generated from the profits of the insurance company that sold the policy and are typically paid out on an annual basis over the life of the policy.
- Policy holders can either receive their premiums in cash through mail or keep them as a deposit with the insurance company to earn interest or have the payments added to their premiums. Most policies also include a final or terminal payment that is paid out when the contract matures.
• Some participating policies may include a guaranteed dividend amount, which is determined at the onset of the policy. A participating policy is also referred to as a “with-profits policy.”