Participating Policy

AAA

DEFINITION of 'Participating Policy'

An insurance contract that pays dividends to the policy holder. 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. Most policies also include a final or terminal payment that is paid out to the holder when the contract matures. Some participating policies may include a guaranteed dividend amount, which is determined at the onset of the policy.

Also referred to as a "with-profits policy".

INVESTOPEDIA EXPLAINS 'Participating Policy'

Participating policies are typically life insurance contracts such as a whole life participating policy. The dividend received by the policy holder can be used in several different ways. First, the policy holder can apply the dividend proceeds to the insurance policy's premium payment. Second, the dividend can be kept with the insurance as a deposit in order to generate interest much like a savings account at a bank. Finally, the policy holder can simply receive the dividend payment in cash, much like a dividend payment on a stock.

RELATED TERMS
  1. Common Policy Declarations

    The declarations that are located in a separate section of a ...
  2. Accelerative Endowment

    An option in a whole life insurance policy to use accumulated ...
  3. Vanishing Premium Policy

    A vanishing premium policy is a form of participating whole life ...
  4. Dividend

    1. A distribution of a portion of a company's earnings, decided ...
  5. Premium

    1. The total cost of an option. 2. The difference between the ...
  6. Participating Preferred Stock

    A type of preferred stock that gives the holder the right to ...
Related Articles
  1. Insurance

    15 Insurance Policies You Don't Need

    Learn how to save money by saying "no" to unnecessary coverage.
  2. Home & Auto

    5 Insurance Policies Everyone Should Have

    Insurance policies come in a wide variety of shapes and sizes. Shop carefully and the right policies will go a long way towards helping you protect your assets.
  3. Options & Futures

    Let Life Insurance Riders Drive Your Coverage

    Find out how these additional benefits can help you customize your policy.
  4. Insurance

    How do I determine the face value of a life insurance policy?

    Read about how to determined the face value for any life insurance policy, and see what circumstances can trigger a change in face value.
  5. Options & Futures

    Is short selling a form of insurance?

    Explore short selling and put options. Learn how put options may be used as insurance to protect positions, and costs associated with using this method.
  6. Insurance

    How to Use a Waiver of Subrogation

    A waiver of subrogation means that a party to a contract waives the right to allow someone (usually an insurance company) to sue the other party to the contract in case of a loss.
  7. Retirement

    What is an equity-indexed annuity?

    Understand what an equity-indexed annuity is, its advantages and disadvantages, and how it differs from other annuity investments.
  8. Insurance

    What are some examples of unexpected exclusions in a home insurance policy?

    Learn about commonly excluded perils with different standard insurance policies. Explore events that homeowners should consider when purchasing insurance.
  9. Insurance

    What are the tax implications of a life insurance policy loan?

    Learn the instances in which you are required to pay taxes on a life insurance policy loan, so you can avoid making a costly mistake.
  10. Insurance

    What's the difference between renter's insurance and homeowner's insurance?

    Renters insurance and homeowners insurance offer similar benefits for occupants and homeowners, but in different ways and for different reasons.

You May Also Like

Hot Definitions
  1. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  2. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  3. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  4. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  5. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  6. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
Trading Center