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. What are the tax implications of a life ...
    Insurance

    What are the tax implications of a life ...

Hot Definitions
  1. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  2. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  3. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  4. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  5. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  6. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
Trading Center