What is participating life insurance?
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UPDATED: Mar 19, 2020
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A participating life insurance policy is one that allows the insurance company to invest your premium amount along with the premium amounts of all its other customers. When investments make money, you are paid a dividend. If they lose money, you do not lose anything.
The following article will provide additional information about participating life insurance as well as non-participating life insurance policies.
After you have finished reading this article then make sure to use the free quote tool above to find both participating life insurance quotes and non-participating life insurance quotes!
How Participating Life Insurance Policies Work
Participating life insurance policies have become increasingly popular over the last 10 years mainly for the fact that policy holders, in many cases, receive money from the policy while they are still living.
As stated earlier, a participating life insurance policy allows your insurance company to participate in the buying of stocks and the investment of your premium. If they are successful, you will be paid a dividend based on the amount of money the company has made. If they are unsuccessful, it does not affect you financially.
In other words, you do not lose money or owe money.
Participating life insurance policies cost more than traditional life insurance polices because of the perceived benefit of gaining money along the way. Though these types of policies do pay dividends at times, they also have down times when no dividends are being paid.
There is no guarantee of dividend payment so you may be paying more for a premium and get nothing in return. Because of this, you may want to consider if the typical amount gained it worth the increased premium.
It may be better to take the extra amount you would pay in your premium for a participating life insurance policy and invest it on your own in stocks or in a mutual fund. This way, you have control over your money. If you invest it in a mutual fund, there is no risk involved and you can move your money as needed. If you are not disciplined enough to do this on your own, you may want to consider letting a participating life insurance policy work for you.
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3 Ways to get a Participating Life Insurance Policy
There are three main ways to get a participating life insurance policy.
- One is to buy a participating life insurance policy outright. This can be done through almost any insurance company or through your employer.
- The second way is to change a non-participating life insurance policy into a participating life insurance policy. This can be requested at any time but will not begin until the anniversary date of the purchase of your policy. Your premium amount will increase, but you will not receive any dividends until the anniversary date of your policy.
- The last way to get a participating life insurance policy is to add it onto a traditional life insurance policy via a rider. A rider is a part of a life insurance contract that specifies any special circumstances or changes you wish to make to your life insurance policy that are not allowed for in the traditional benefits. Adding a participating life rider, allows you to designate a certain amount of your premium to be included in the participating benefits. Your premium will not be as much as it would be by purchasing an outright policy, but neither will the dividends you get paid.
How Non-Participating Life Insurance Policies Work
A non-participating life insurance policy is a traditional life insurance policy. You purchase a policy with a designated pay out amount and pay the monthly premiums. There are no dividends, no investing, and no changes in premium amounts. This is the type of policy you want if you are investing money other ways or have other money or assets you will be leaving behind in addition to the policy. Remember, if you purchase a non-participating life insurance policy, you can always change it to a participating life insurance policy at a later date.
Deciding if a non-participating life or a participating life insurance policy is right for you depends on many factors. An insurance agent can help you sort out the factors and recommend the policy type that is best for you. One way to find a company that you can work with is to compare several companies all at once through an online comparison tool.
This type of tool will give you access to insurance rates and quotes from different companies all in one convenient place. Click on the life insurance tool to start now!