Last updated: June 22, 2023
What is participating life insurance?
Participating life insurance (also called par insurance) is a contract that offers three important features: lifetime insurance, cash-value growth and a chance to earn policy dividends. Here’s how it works:
Lifetime insurance
A participating policy includes whole life insurance protection, which provides coverage that’s guaranteed for life. This means that your coverage will never expire and your beneficiaries are guaranteed to get a tax-free payment (also called the death benefit) after you die – this is provided you’ve paid your premiums Premiums refer to the monthly or annual fees you pay in exchange for having insurance. .
Cash-value growth
Participating policies also come with a savings portion called the cash value. You can borrow against your cash value or withdraw funds from it Please note that borrowing against your cash value or withdrawing from it may reduce your policy’s death benefit. . Your cash value can grow over time on a tax-preferred basis. This means you won’t have to pay tax on any cash-value growth, unless you borrow against the cash value above certain limits or start withdrawing funds.
Chance to earn policy dividends
A participating life insurance contract also gives you the opportunity to earn policy dividends. We calculate the amount each year. You can use these dividends in different ways. For example, you can:
- let them earn interest and grow in a separate account,
- buy additional coverage within your policy,
- reduce your premiums, or
- receive the amount in cash.
Some of these options also come with tax implications. It’s also important to note we don’t guarantee policy dividends.
