Participating Life Insurance Vs. Non-Participating Life Insurance

If you are just hearing the term participating life insurance or non-participating life insurance, you are not alone. This guide will help you make informed decisions regarding which one is good for you and your loved ones.


Participating life insurance is an insurance policy that allows you to receive part of the surplus earnings of your life insurance provider. On the other hand, non-participating life insurance comes with no dividends. That is, you can now receive a bonus or a share of the profits of the insurance company.

Cash value

Participating life insurance, also known as whole life insurance, has a cash-value component, whereas non- participating life insurance is temporary life insurance with no cash-value component. This means that if you are a policyholder of non- participating life insurance, you cannot borrow money from the policy, let alone have access to cash-value accounts.


Policyholders of participating life insurance pay more premiums than individuals who opt for non-participating life insurance. This is because non-participating life insurance comes with few risks such as no cash value accounts. Unlike the non-participating life insurance holders, owners of participating life can borrow money from their accounts and receive dividends. All these benefits are among the reasons why you may pay more if you want a participating life insurance policy.


People who own participating life insurance do not pay tax on their dividends. The IRS considers the dividends as the excess amount invested in the insurance policy. More so, the amount of interests they make on their cash value account is not taxed until they want to withdraw money from it. In contrast, non-participating life insurance policies are not free from tax.


Unlike non-participating life insurance which provides only guaranteed benefits, non- participating life insurance offers both guaranteed and non-guaranteed benefits. In order words, policyholders of non- participating life insurance and participating life insurance are guaranteed of getting death benefits; however, policy owners of participating life insurance are not guaranteed of getting bonuses and cash dividends.