Participating Policy

Posted in Finance, Accounting and Economics Terms, Total Reads: 302
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Definition: Participating Policy

Participating Policy is an insurance policy that pays dividends to the holder based on the policy company's performance. Insurance companies are like any other companies and earn money by selling products i.e. insurance policies. They make profit and distribute dividends to the holders of participating policy.


There are two main types of participating policies: 

• Single premium contracts

• Regular premium contracts


Advantages:

• Getting returns in an insurance products too


Disadvantages:

• Premium paid would be higher which carries opportunity cost of investing at other instruments


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