Utah Life Producer Practice Exam

Participating life insurance policies are characterized by their feature that allows policyholders to receive dividends. These dividends are a portion of the insurer’s surplus and are typically paid out when the company performs better than expected in terms of mortality, investment income, and operating expenses. This means that policyholders of participating policies actively share in the financial success of the insurer, which can enhance the policy’s overall value and provide additional benefits to the insured.

The presence of dividends can be a significant advantage for policyholders since they can choose to take these dividends in cash, use them to reduce premiums, purchase additional insurance, or allow them to accumulate within the policy. This aspect is a core distinction separating participating life insurance from non-participating policies, which typically do not offer any dividend payments and thus do not share in the insurer's profits in this way.

In contrast, non-participating policies are often simpler and usually have fixed premiums and benefits, but they lack the benefits associated with dividend payments. This difference highlights the appeal of participating policies for individuals looking for not just a death benefit, but also a potential source of financial gain over time through dividends.