Participating PolicyA life insurance policy under which the company agrees to distribute to policyowners the part of its surplus that its Board of Directors determines is not needed at the end of the business year. How do you profit of your life insurance policy depends the use you make of your parts.
The most common options are the following:
You can use the annual shareholdings as dividend to increase your capital at no costs. This option, the most common, is called released insurance subsidy. It also increases the value of future redemption. Shareholdings can also be used to purchase a Life Insurance for one year.
You can get an additional protection by combining predetermined paid-up insurance amount option to purchase an insurance for one year. Your shares, which increase over time can be used to replace term life insurance by released insurance so the extra protection becomes permanent. It is a good way to get whole life insurance at reduced cost.
Your shares of participating life insurance can be use to reduce your annual premiums payment.
You can, of course, cash out your participating shares.
You can also leave your shares in filing. The insurer will pay interest or placed in a growth fund, as separate shares. In the second event, the return is not guaranteed. The shares left in file may be withdrawn at any time. When you die, unlike the surrender value, the share value is part of the payable insured sum to your beneficiary or succession. Notice that the interest earned on investments left in deposit is subject to income tax.
This formula uses both concepts of premiums reduction and bonus paid-up insurance. Typically, after bonuses were paid for a number of years (between 10 and 15 years, for example), the futures stakes are used to pay portion of the premium. Remember shares of participating life insurance are not guaranteed. The beginning of self-financing contract depend on the level of your shares. This formula could require that the policy owner declare the accumulated holdings income that exceeded the paid premiums. Contact your agent for more information.