When shopping for life insurance, it’s important to understand the advantages of various types of coverage, including a participating life insurance policy, which offers the potential to grow a permanent life insurance policy’s cash value by receiving interest and dividends from your insurance carrier. If you’re considering a participating life insurance policy, one of the major benefits of this type of coverage is the opportunity to participate in the financial success of the insurance company through the receipt of dividends, giving you a sense of ownership and potential for additional financial gains. Let’s discuss the details of participating life insurance policies and the financial benefits this type of coverage offers.
Understanding Participating Life Insurance Policies
Participating life insurance policies, which are typically whole life insurance policies, are a type of permanent life insurance that provides both a death benefit and a cash value component. These policies are considered "participating" because policyholders may be eligible to receive dividends from the insurance company's profits. The key features of a participating life insurance policy are:
Dividends: Participating policies are eligible to receive dividends, which are a portion of the insurer's surplus earnings. Policyholders can receive dividends in cash, use them to reduce premiums, accumulate them with interest, or purchase additional paid-up life insurance.
Cash Value Growth: Participating policies accumulate cash value over time, which grows on a tax-deferred basis. The cash value can be accessed through withdrawals or policy loans, providing a potential source of tax-advantaged funds for policyholders.
Death Benefit: Participating life insurance policies provide a guaranteed death benefit to beneficiaries upon the policyholder's passing. The death benefit is generally income tax-free and can help provide financial security for loved ones.
Is universal life insurance a type of participating policy?
Universal life insurance is not typically considered a type of participating life insurance policy. The primary attribute of participating policies is that they distribute dividends to policyholders based on the financial performance of the insurance company, and while universal life is a form of permanent life insurance, they typically don’t include dividends from insurance carriers.
On the other hand, universal policies offer more flexibility in premium payments and death benefits compared to traditional whole life insurance. Universal life insurance policies are not structured to provide policyholders with dividends based on the insurer's profits, which is a defining characteristic of participating life insurance.
Find a Permanent Life Insurance Policy with the Help of SelectQuote
Finding a permanent life insurance policy may seem overwhelming, especially as you navigate different types of coverage like participating life insurance policies. Let SelectQuote take care of the heavy lifting for you. Our licensed insurance agents will walk you through the application process and compare rates from a variety of trusted carriers in just minutes. Whether you’re looking for a participating life insurance policy or another type of coverage, we’ll help you find the right policy for your needs and budget.
