Participating Policy


A with-profits policy or participating policy is an insurance contract that participates in the profits of a life insurance company. The company is often a mutual life insurance company, or had been one when it began its with-profits product line. Similar arrangements are found in other countries such as those in continental Europe.

Participating Policy

What is a ‘Participating Policy’

A participating policy is an insurance contract that pays dividends to the policy holder. Dividends are generated from the profits of the insurance company that sold the policy and are typically paid out on an annual basis over the life of the policy. Most policies also include a final or terminal payment that is paid out to the holder when the contract matures. Some participating policies may include a guaranteed dividend amount, which is determined at the onset of the policy.

Also referred to as a “with-profits policy”.

Explaining ‘Participating Policy’

Participating policies are typically life insurance contracts such as a whole life participating policy. The dividend received by the policy holder can be used in several different ways. First, the policy holder can apply the dividend proceeds to the insurance policy’s premium payment. Second, the dividend can be kept with the insurance as a deposit in order to generate interest much like a savings account at a bank. Finally, the policy holder can simply receive the dividend payment in cash, much like a dividend payment on a stock.

Further Reading

  • Agency theory and participating policy usage evidence from stock life insurers – [PDF]
  • Use of online information resources by RMIT University economics, finance, and marketing students participating in a cooperative education program – [PDF]
  • Combining participating insurance and financial policies – [PDF]
  • Fair pricing of life insurance participating policies with a minimum interest rate guaranteed – [PDF]
  • Participating mortgages and the efficiency of financial intermediation – [PDF]
  • The financial performance of firms participating in the EU emissions trading scheme – [PDF]
  • Pricing participating products with Markov-modulated jump–diffusion process: An efficient numerical PIDE approach – [PDF]