Participating Policy - Definition and Example

What is a participating policy? It is a type of life insurance package that allows the policy owner to share or “participate” in the profits of the insurance company. The company is usually a Mutual Life Insurance company, also meaning that the profits are mutually shared between participants.

A participating policy usually can only be a whole life insurance policy. It is normally not available for a term life insurance policy. Profits can be paid to the policy owners in the form of spendable cash, cash value, additional paid-up insurance, reduced premiums, or term life insurance.

An example of a participating policy would be a story about Carlos. Carlos wisely decides to follow our Life Insurance Selection Process to discover that choosing a participating whole life insurance product would be best for him in his current situation. He selects a good company and buys the insurance. His life insurance company happens to make a profit the following year after collecting premiums, paying claims, paying operational expenses, and earning investment revenue. The company decides that it has $10 billion to share with its 10,000,000 participants. Therefore, each participating policy owner receives $1,000 in the form of his/her choice.

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Tags: participating policy

This entry was posted on Thursday, January 24th, 2008 at 3:36 pm and is filed under Whole Life Insurance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.