Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Common to Life and Health InsuranceMedium
A Florida licensed agent is selling a life insurance policy that allows the policyholder to share in the insurer's surplus. What type of policy is the agent most likely selling?
- AUniversal Life Policy
- BNon-Participating Policy
- CParticipating Policy
- DTerm Life Policy
Show answer & explanationAnswer & explanation
Correct answer: C. Participating Policy
A participating policy allows the policyholder to share in the surplus earnings of the company, typically through dividends. This is a distinguishing feature of participating policies.
Why the other options are wrong
- A. Universal life policies offer flexible premiums and death benefits but do not inherently share in insurer surplus.
- B. Non-participating policies do not pay dividends and thus do not share in the insurer's surplus.
- D. Term life policies do not typically share in surplus; they provide coverage for a specified term.
Participating Policy
An insurance policy that allows the policyholder to share in the divisible surplus of the insurance company, typically through dividends.
- Issued by mutual insurers.
- Policyholders receive dividends.
- Dividends are not guaranteed.
Memory trick: Participating policies 'part' with profits, non-participating do not.