Non-participating Whole Life Insurance

When you talk to an insurance agent, he will ask you whether you prefer a "participating" insurance policy or a "non-participating" permanent life insurance policy. Companies earn profits from their investments and choose to share them with policy holders. You can decide whether to be a part of this profit-sharing. These are bonuses paid at the end of the year. However, as with other types of bonuses, the money is not guaranteed.

About Non-Participating Insurance

Non-participating whole life insurance is when the policy holder pays a fixed premium (as opposed to indeterminate premium) each month to maintain coverage that will last throughout a lifetime. If you sign up for this type of policy, you will get free quotes that show you fixed rates. You will get a chart that explains your premiums, benefits, and face value. If the premium is set to rise at any point during coverage, you will know about it. However, usually the company will not alter any portion of the life insurance policy. Some people like knowing exactly what they must pay and what they will receive, and other people prefer to take some risks with their money. The "non-participating" portion of the policy means that the company does not give you any dividends based on their profits.

Participating Whole Life Insurance

The opposite of a non-participating whole life insurance policy is a participating policy. These types of policies guarantee the holder the same kind of benefits as the non-participating policy. However, the company will give the holder dividends each year. The dividend is calculated based on the company's bottom-line profits. The company makes payments at the end of each year to their participating insurance holders. Clients can decide to accept the dividends in cash, leave it in the account, or apply it to their premium payments. Some companies allow the client to add the bonus money to the face value of their account, so their family members will receive the extra cash.

Non-Participating Pros and Cons

The premiums for participating policies are higher than non-participating policies. This is why many people prefer to get non-participating policies. Another reason is that dividends are not guaranteed, so they don't want to take the risk with participating policies. The only time a client should do a participating policy is if the company is making high profits. This will assure them that the dividends will be worth the extra premium money they will pay each month.

Life Insurance Company Ratings

One way you can find out if a life insurance company is in good financial health is to look at their ratings. Almost every senior insurance company has a "grade" determined by independent review boards. Just like in school, an "A" or "B" means that the company is healthy and making profits. If the company has anything below a "B," be cautious about accepting a participating life insurance policy. You may not receive much in terms of dividends if the company is having financial trouble.

Compare Life Insurance Types

Before you make a choice about a participating or non-participating whole life insurance policy, you should examine the company's records to see if they have a good dividend history. Insurance companies will attempt to predict their profit earnings each year, but there is no guarantee that they will be accurate. There is always some element of risk, so decide if you want to take that risk. Overall, your focus should be how to provide the biggest payout to your family or beneficiaries. Think about how inflation will change the value of the dollar in your lifetime and ask yourself if you can afford higher upfront payments.