What Is Participating Whole Life Insurance?

Participating whole life insurance is a type of permanent life insurance that provides lifetime coverage as long as you pay the policy premiums. The premiums remain the same throughout the premium-paying period, ensuring that the costs to maintain the policy do not increase as you age or experience health issues. This type of insurance has a tax-advantaged investment component that allows policyholders to accumulate cash value that grows free of annual taxation.

Benefits of Participating Whole Life Insurance

Participating whole life insurance offers several benefits, including:

Benefit Description
Death benefit Distribution of the death benefit and any paid-up additions tax-free to named beneficiaries, enhancing your estate
Annual vesting Guaranteed cash value “floor” that is formed when policy dividends are used to purchase additional paid-up insurance, which cannot be reduced unless initiated by the policy owner
Account growth Guaranteed cash values and policy dividends kept in your policy are not subject to tax on growth during your lifetime, helping you meet long-term financial goals and transfer assets efficiently to beneficiaries
Access to cash Access to accumulated cash value of your policy at any time through policy loans, policy withdrawals, or pledging the accumulated cash value as collateral for a tax-free line of credit, providing added liquidity and flexibility

Participating whole life insurance allows policyholders to “participate” in the insurance company’s profits. The company assesses its profit each year with the participating investment fund’s actual claims and expenses. These profits are then redistributed to the policyholder. While these payments are not guaranteed, most companies have rarely skipped a year of distribution. Policyholders can take these dividends in cash, leave them to accumulate, or use them to purchase additional paid-up insurance.

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