Participating Whole Life Insurance: Things to Know by TheG

Participating Whole Life Insurance

As you shop for life insurance, there’s sure to be one thing on your mind: the financial security of your family in the event that you pass on.

With the help of whole life insurance, you can guarantee that your loved ones will receive a death benefit upon your death. This isn’t fun to think about, but it definitely gives you peace of mind.

A whole life insurance policy provides permanent insurance, ensuring that your family can cover needs such as:

  • Funeral and final expenses
  • Income for your surviving spouse and children
  • Daily living expenses

While all of this is important, there is something else you need to know about whole life insurance: it can be one of the best investments you ever make.

In addition to financial support for your family after your death, many whole life insurance policies offer the benefit of cash value accumulation.

In short, the cash value of a policy is the amount that a company will pay to a policyholder in the event that coverage is terminated.

As long as your policy remains active, due to you paying your premium in full and on time, it will continue to accumulate value on an annual basis.

With this type of policy, you’re getting more than a death benefit. You’re also accumulating cash that can be used during your lifetime, or by your family after you are gone.

The Right Whole Life

But make sure you look for the right kind of whole life insurance. One of the most important aspects to consider is getting a: Participating Whole Life. Participating means that you participate in the performance of the company. The better the company you bought does, then the more they will share with you.

Most participating whole life policies get dividends.  

It’s All About the Dividends

A participating whole life insurance policy is eligible to earn dividends. Generally speaking, a dividend is nothing more than earnings that a company distributes to policyholders. Most mutual companies offer participating whole life insurance policies.

Here are a few things you need to know about dividends:

  • You can use dividends to reduce future premium payments.
  • Dividends help the policy growth
  • You can use dividends to purchase additional coverage.
  • You can use dividends as a means of obtaining cash.

When you purchase a policy from a whole life participating company, you do so with the idea that you will receive dividends in the future.

However, remember this: although dividends are expected, they are never guaranteed.

Related: Whole Life Dividend Rate History

How Are Whole Life Dividends Calculated?

Dividends are calculated based on many factors. Consider the following:

  • A portion of the premium paid is deposited into the participating account.
  • The money in the account is then invested in bonds, cash equivalents, and cash with the hopes of providing stable returns to policyholders.
  • Every year, a portion of the earnings from the account are distributed to policyholders.

Dividend payouts differ from one participating whole life insurance company to the next, with this based largely on the financial stability and growth of the company.

Note: other factors that impact dividend payouts include the mortality rate of policyholders, the fund’s performance, and expenses.

Some companies offer dividends as high as 6.4%, and these dividends usually go up as interest rates go up.  

Non Participating vs. Participating Example

So now let’s look at an actual example with numbers. The following is a whole life for a 35 year old male with excellent health. We will compare numbers with and without dividends so you see the difference long term. 

Non Participating (No Dividend)
Age 50 65 75 85
Cumulative Premium $44,925 $89,850 $119,800 $149,750
Total Cash Value $42,070 $104,635 $150,800 $192,713
Total Death Benefit $250,000 $250,000 $250,000 $250,000

Next is a whole life participating policy with dividends that help grow the policy. 

Participating (With Dividend)
Age 50 65 75 85
Cumulative Premium $44,925 $89,850 $119,800 $149,750
Total Cash Value $50,502 $174,357 $328,757 $565,569
Total Death Benefit $274,108 $377,834 $507,991 $704,232


If you look at the numbers on this example, this client at age 65 would have $70,000 more in the participating policy. 

Mutual Companies Offer Participating Policies

One of the easiest ways to find out if a company offers participation policies is to see if they are a “mutual” insurer. Most companies that have the “mutual” word in their name, have participating policies.

However, there are certain companies that used to be or still are mutually owned but don’t have participating policies:

  • Liberty Mutual
  • John Hancock
  • Mutual of Omaha

Here is a table that will show participating vs non-participating whole life companies:

Participating Non Participating
MassMutual AIG
Foresters State Farm
Penn Mutual Farmers Life
New York Life American Income Life
Guardian Life Americo
Ohio National Nationwide
One America Liberty Mutual
Lafayette Life John Hancock

In general, we would always recommend sticking to Participating whole life policies. The dividend makes the difference.

Final Thoughts

If you’re going to purchase whole life insurance, you might as well do so with the idea that this can double as an investment.

There are many participating whole life insurance companies, with some of the best including:

While there is no way of knowing what the future holds, a participating whole life insurance policy could pay annual dividends for the rest of your life.

Additional Reading

Can Your Cash Value Life Insurance Be Taken By Creditors? 

Top 7 Companies for Cash Value 

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