The Difference between Participating and Non-Participating Whole Life Insurance

There are several different types of life insurance, and one of them is whole life insurance, a form of permanent life insurance. However, in a world on its own, whole life insurance also comes in different types. Two of these are participating and non-participating. If you are considering whole life insurance, it is very important that you understand what participating and non-participating whole life insurance are to know which will suit your needs best.

First, before we highlight the differences between these two, let us first understand what whole life insurance is. Whole life insurance is a type of insurance that provides coverage for your entire life. This means that you will surely get death benefits from a whole life insurance policy, since it will only end when you die. Upon your death, your beneficiaries will get the full payout. A lot of people, however, are not so keen on buying whole life insurance, especially with the presence of other life insurance types in the market, such as the term life insurance and the universal life insurance. These are more preferable choices, simply because they offer the policyholder flexibility that whole life insurance does not offer. This means that you have a fixed rate of premiums that you have to pay for the duration of the contract, and this rate will not change. Despite this, there are advantages to buying whole life insurance, the foremost being its permanence.

Moving on, non-participating whole life insurance may not be the best type of whole life insurance is you want to retain even just a small level of flexibility in a whole life policy. A non-participating whole life insurance is a policy that issues everything the moment the policy is finalized. This means that the premium rates, the cash values, and the death benefits are all decided upon from the start, and all throughout the period, which is equivalent to your entire life, these things will not change at all. In a positive note, however, the life insurance company also faces a risk in this type of whole life insurance because they are also just relying on actuary estimates to calculate the lifelong rates and cash values.

On the other hand, as to be expected, a participating whole life insurance policy is more or less the same policy, except on the way it handles any excess amount that the company will get in case the actuary estimates are too high. In a non-participating, you won't get any centavo from the company outside of the death benefits and other payouts. However, in a participating, if the actuary estimates they base your rates upon are higher, the company has the obligation to share the excess amount with you. Thus, when they charge you higher, you can rest assured that if these estimated amounts turn out to be so much in excess, you will still get some of your money back. Even if actuary estimates are usually right on mark, having that consolation just in case will be easier for you than having no chance at all.