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. Life Insurance

    A protection against the loss of income that would result if ...
  5. Participating Preferred Stock

    A type of preferred stock that gives the holder the right to ...
  6. Premium

    1. The total cost of an option. 2. The difference between the ...
Related Articles
  1. 15 Insurance Policies You Don't Need
    Insurance

    15 Insurance Policies You Don't Need

  2. 5 Insurance Policies Everyone Should ...
    Home & Auto

    5 Insurance Policies Everyone Should ...

  3. Let Life Insurance Riders Drive Your ...
    Options & Futures

    Let Life Insurance Riders Drive Your ...

  4. How the Affordable Care Act Changed ...
    Insurance

    How the Affordable Care Act Changed ...

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center