Difference Between Participating and Non-participating Whole Life Policies

When searching for a whole life insurance policy, there are two types of plans, participating and non-participating. Both offer policyholders a different range of benefits, which is why it helps to understand key differences before choosing.

Below, we’ll introduce you to both and point out key differences so that you can find the best one for you.


What Is a Participating Life Insurance Policy?

Participation in a life insurance policy refers to the policyholder’s ability to benefit from their whole life insurance policy’s accumulated profits. While most large insurance companies make profits, not all of them share with their policyholders. With a participating whole life insurance policy, policyholders can collect profits in the form of bonuses or dividends.

In most cases, these payments are dispersed annually, with exceptions in some cases. For policyholders with this type of plan, they can receive benefits in one of the following ways:

  • The insurer will pay out to policyholders directly
  • Policyholders can use the payout to pay their premium
  • Policyholders can invest their funds in the insurer and collect interest over time

Whole life insurance plans already come with a number of benefits, all of which are still active when the insured choose a participating life insurance policy. While this is a great choice for some, a non-participating policy is another that some policyholders can get more out of.


What is a Non-Participating Life Insurance Policy?

As opposed to a participating life insurance policy, non-participating policies do not pay out dividends or bonuses to the insured. Instead, they award policyholders differently, doing so with guaranteed benefits.

These guaranteed benefits grow over time, allowing policyholders to use them toward life goals, securing assets, or assisting their loved ones with their final arrangements. These accruals are collected over time and can add up to substantial amounts assuming that all premiums are paid.


Participating Vs. Non-Participating: The Differences

When deciding which policy to go with, there are a number of factors that policyholders should be aware of. Before deciding between one or the other, policyholders should know the key differences between the two and how they affect them before deciding. Below are key points where the two whole life insurance policies differ.


Share in Profits

The biggest difference between participating and non-participating life insurance policies deals with the share in profits. In participating, policyholders can benefit from the insurer’s profits. In non-participating, they do not receive any of the insurer’s profits, though they do have other types of guarantees.


Non-guaranteed payments

The policyholder can not choose when profits are dispersed and receive payments only when the insurance companies decide to pay them out. This is typically once a year, something that depends on the insurance company.

Non-participating coverage has no non-guaranteed payouts, as they do not allow policyholders to benefit from profits. All payments are guaranteed as per the terms laid out in the policy and can therefore not be changed or tweaked in the process.


Guaranteed payments

The types of payments received by the policyholder with each type of life insurance policy varies. For example, with participating life insurance, bonuses or dividends are paid out based on the profits of the insurer. Insurance companies will typically payout annually, though it’s not guaranteed to work out that way.

With non-participating, policyholders do not benefit from profits, though they are guaranteed payments of one sort. As they pay their premium, the amount collected over time matures and earns a benefit. This benefit is paid out to the policyholder as a death benefit or as part of the matured amount.


Participating Vs. Non-Participating: Which to Choose?

Because of the benefits and the accrual of profits over time, participating life insurance policies are better than non-participating. They are considered a long-term investment, one which allows the policyholder to benefit more the longer they keep paying toward their policy.

If whole life insurance is something that policyholders plan to keep for the duration of their life, then a participating policy is a better pick. Over time, those dividends can be used to pay a premium or transfer to a savings account that can collect interest over time. At any time, this amount can be used as a loan or paid out in addition to the death benefit.

The one downside that policyholders need to be aware of with participating is that the cost is much higher than non-participating.  Because the insurance company pays out dividends, they tend to make up for it in the amount they charge each policyholder.

Before choosing either one, those looking for whole life insurance should weigh their options, calculating how much they have to add to their policy and see if they benefit from it over time.


Deciding Which Whole Life is Best for You

When it comes to securing finances for the present and future, there is a lot to consider. Above all, there is the clear need to secure assets and loved ones, something that individuals can do with help from a whole life insurance policy.

While some may need it just for the coverage, others may want to use their life insurance policy as a nest egg, able to borrow from their collected maturity for investments or business purposes. Deciding which one can be difficult, which is why policyholders are encouraged to discuss their options with a professional.


Call Sim

To get the most out of your policy, finding a professional that knows about insurance policies and their profit potential is key. That’s why Canadians searching for a policy that works for them should give Sim a call, working with a professional that knows about life investments and life insurance policies.

She will work with business professionals, those who are self-employed, and anyone else looking for a life insurance policy that fits their needs. When you’re in doubt about which policy to choose, she can help you weigh your options, getting you closer to your financial goals.

Securing your assets shouldn’t be difficult, which is why Sim is there to help you navigate policies and find your best fit for your financial future.


FAQs & Helpful Resources Regarding Whole Life Insurance


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When To Get Covered

When it comes to life insurance there really is no time that is too soon to get covered. And, this is because the younger you are, the cheaper those premiums are going to be. Not only this, but you are probably healthy right now.

If you wait until something bad happens, you will not only without a doubt face higher premiums, but you might not even be able to get covered at all.





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