Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Life Insurance and AnnuitiesMedium
A Florida resident is reviewing their non-participating whole life insurance policy. Which of the following statements is true regarding this type of policy?
- AThe premiums are generally higher than a participating policy from the same insurer.
- BThe cash value growth is tied to the performance of the insurer's separate accounts.
- CThe policy will not pay dividends to the owner.
- DThe policyowner is eligible to receive dividends based on the insurer's profits.
Show answer & explanationAnswer & explanation
Correct answer: C. The policy will not pay dividends to the owner.
Non-participating policies do not pay dividends to the policyowner. Dividends are a feature of participating policies, which allow policyowners to share in the insurer's surplus.
Why the other options are wrong
- A. Premiums for non-participating policies are generally lower than participating policies because they don't include a dividend component.
- B. Cash value growth is guaranteed at a fixed rate in whole life, not tied to separate accounts (that's variable life).
- D. This describes a participating policy, not a non-participating one.
Non-Participating Policy
An insurance policy that does not pay dividends to the policyowner, typically having lower premiums than participating policies.
- No dividends are paid.
- Premiums are usually lower.
- Profits belong solely to the insurer's shareholders.
Memory trick: Non-participating means 'No Pie' (no share of profits).