Participating Life Insurance Policy: What Is It? How Does It Work?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is a Participating Life Insurance Policy?

A participating life insurance policy is a type of whole life insurance. This policy not only provides a death benefit but also offers a savings component. The unique feature is its ability to earn dividends from the insurance company’s profits.

Participating Whole Life Insurance

How Does It Work?

  1. Premium Payments: You pay regular premiums, part of which goes towards the death benefit and part into a savings account.
  2. Dividend Earnings: The savings component can earn dividends based on the insurer’s financial performance.
  3. Use of Dividends: Dividends can be taken in cash, left to accumulate interest, used to reduce premiums, or purchase additional insurance.


  • Lifetime Coverage: Ensures protection throughout your life.
  • Cash Value Growth: The savings component grows over time.
  • Dividend Earnings: Potential earnings from the insurer’s profits.
  • Flexible Use of Dividends: Options to use dividends as per your financial needs.


Participating Life Insurance Policy Features

Death BenefitGuaranteed payout upon policyholder’s death.
Cash ValueSavings component that grows over time.
DividendsEarnings from the insurer’s profits.
PremiumsRegular payments to maintain the policy.
Policy Loan OptionBorrow against the policy’s cash value.
Participating Whole Life Insurance Policy


Participating life insurance policies offer lifelong coverage with a savings component that can earn dividends. While they provide flexibility and potential for cash value growth, they are more expensive and complex than term policies. Understanding these aspects helps in making an informed decision about life insurance needs.

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Frequently Asked Questions

What is the difference between participating and non-participating whole life insurance?

Participating policies allow policyholders to receive dividends, while premiums are typically lower with non-participating plans. Furthermore, these do not award any dividend payments. So take your pick: a potentially lucrative investment or an affordable way of protecting you and your family for years to come!

Which is better, participating or non-participating insurance?

When considering which type of insurance is best – participating or non-participating – it’s essential to understand the key differences. For example, a non-participating policy will not provide any bonus or dividend payments but guarantees death and maturity benefits. Conversely, a participating policy offers more than just protection; you’ll also receive rewards in the form of bonuses! Thus, investing in a participating plan may be worth exploring if you want long-term returns from your policy provider.

What does a participating insurance policy do?

With a participating insurance policy, the insured can access dividends not seen as taxable distributions by the IRS. Instead, these returns of profits are considered “returns of premium” and therefore don’t have any income tax implications.

What is participating preferred vs. non-participating?

Participating preferred stockholders can receive investment and dividends on their shares if the company is liquidated. On the other hand, non-participating preferred shareholders may only be entitled to their initial investment or pro-rata sales proceeds – whichever amount is higher.

Are participating premiums higher than non-participating premiums?

Compared to non-participating policies, participating policy premiums tend to be higher due to the dividend expense. This additional cost is a refundable excess and can have legal implications for taxes owed on the policy.

What are the advantages of a non-participating provider?

As a Non-Par Provider, you can reap several benefits that traditional providers lack. For starters, beneficiaries may directly pay for your services in full at the time of service without any third-party payment beforehand. This expedites payments and helps ensure that you get timely reimbursement. Moreover, with Non-Par Providers allowed to bill up to 115% of the Medicare Fee Schedule, this translates into higher hourly rates than usual – making it an advantageous career choice!

*Disclosure: Some of the links in this guide may be affiliate links. I may receive a commission at no cost to you if you purchase a policy. It helps us keep the lights on!

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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