Participating Policy


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".

BREAKING DOWN '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.

  1. Dividend

    A distribution of a portion of a company's earnings, decided ...
  2. Common Policy Declarations

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

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

    A vanishing premium policy is a form of participating whole life ...
  5. Life Insurance

    A protection against the loss of income that would result if ...
  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

    Avoiding The Modified Endowment Contract Trap

    To avoid MEC status, flexible-premium policies must cap the amount that can be paid into the policy over a period of seven years.
  5. Economics

    Federal Deposit Insurance Corporation (FDIC)

    The Federal Deposit Insurance Corporation (FDIC) insures deposits in banks and thrift institutions.
  6. Economics

    How Does Reinsurance Work?

    Reinsurance is a practice in which insurers transfer portions of portfolios to other parties in order to reduce their exposure to claims.
  7. Insurance

    Understanding Insurance Claims

    An insurance claim is a formal request made to an insurance company that asks for a payment based on the terms of the policy.
  8. Insurance

    How To Read a Permanent Life Insurance Illustration

    To help you understand your life insurance policy, companies provide a permanent life insurance illustration. Here is how to read and understand it.
  9. Taxes

    Tips for Reducing Health Insurance Expenses

    For many self-employed people, health insurance premiums can make up a hefty percentage of their budget. Here are some tips on how to deduct them.
  10. Professionals

    How Advisors Can Help When a Service Member Dies

    Finances are probably last thing that survivors of our nation’s deceased service members want to deal with. Here's what advisors can do to help.
  1. Does renters insurance cover personal injuries?

    Renters insurance provides two main forms of coverage – liability and contents insurance – and they are offered together ... Read Full Answer >>
  2. Does renters insurance cover jewelry?

    Renters insurance provides personal property coverage that covers your personal property – including jewelry – in case of ... Read Full Answer >>
  3. Why might landlords require renters insurance?

    Landlords can require renters insurance to lower their own liability and insurance costs. According to data from the Insurance ... Read Full Answer >>
  4. What is the expense ratio in the insurance industry?

    The expense ratio in the insurance industry is a measure of profitability calculated by dividing the expenses associated ... Read Full Answer >>
  5. What is the difference between a peril and a hazard?

    The two related terms "peril" and "hazard" are often used in reference to the insurance industry. Essentially, a peril is ... Read Full Answer >>
  6. What level of reserve ratios is typical for an insurance company to protect against ...

    In the United States, and most developed nations, regulators impose required statutory capital reserve ratios on insurance ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  2. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  3. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  4. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  5. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  6. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
Trading Center