What accurately describes a participating insurance policy?

A participating insurance policy is one in which policyholders are entitled to receive dividends from the insurer. These dividends are essentially a return of a portion of the premiums paid, reflecting the company's financial performance and profitability. When an insurance company performs well, such as having lower-than-expected claims or operating expenses, it may distribute a portion of those earnings back to policyholders in the form of dividends.

This characteristic distinguishes participating policies from non-participating policies, where policyholders do not receive dividends. The potential for dividends can make participating policies more attractive to some consumers because it offers the possibility of an additional financial benefit beyond the policy's basic coverage.

While paying additional premiums may be true for some policies, it is not a defining characteristic of participating policies specifically. The eligibility for dividends directly correlates to the nature of participating policies, and the ability to sell a policy is not a factor influenced by whether a policy is participating or non-participating. Therefore, the accurate description is that policyowners may receive dividends.