What is Non-participating Insurance?
A non-participating life insurance policy is one that doesn’t pay the policy owner dividends. It gets its name because the policy owner doesn’t participate in a plan to share the life insurance company’s profits.
Participating policies vs. non-participating policies
A non-participating policy contrasts against a participating policy, which pays dividends to the policy owner if the insurance company experiences a surplus in a specific period of time. Participating policy owners may receive dividends annually, for example, assuming their insurance company has had a profitable year.
Participating policies offer the upside of dividends, which the policy owner can usually take as cash, use to increase their policy’s cash value, or apply to their premiums. But to give themselves the best chance at paying a dividend and to cover the administrative costs associated with managing and distributing dividends, insurance companies charge more for participating policies. In other words, non-participating policies usually come with lower premiums.
Term life insurance is a non-participating insurance policy type, while various types of permanent life insurance are more likely to be participating policies. That said, you may be able to find permanent non-participating life insurance.