Which statement best describes a non-participating policy?

Which statement best describes a non-participating policy?

• A. It provides variable death benefits
• B. It does not pay dividends to policyholders
• C. It allows for lower premium costs
• D. It guarantees cash value accumulation

Answer: (B)

A non-participating policy is characterized by the fact that it does not pay dividends to policyholders. This means that unlike participating policies, where policyholders can receive a share of the insurer's profits in the form of dividends, non-participating policies are set up with a fixed premium structure and benefits. This structure typically leads to more predictable costs and benefits for the insurer and the policyholder alike. While non-participating policies often offer more stable premium rates, they do not incur additional costs associated with dividend distributions that participating policies might have. Therefore, option B accurately captures the essence of a non-participating policy. The other statements do not accurately reflect the key feature of non-participating policies. For instance, while non-participating policies may have a guaranteed cash value accumulation, this feature is not unique to them and varies by policy. Additionally, the absence of dividends does not inherently lead to lower premium costs; rather, it impacts the overall financial structure of the policy.

A non-participating policy is characterized by the fact that it does not pay dividends to policyholders. This means that unlike participating policies, where policyholders can receive a share of the insurer's profits in the form of dividends, non-participating policies are set up with a fixed premium structure and benefits. This structure typically leads to more predictable costs and benefits for the insurer and the policyholder alike.

While non-participating policies often offer more stable premium rates, they do not incur additional costs associated with dividend distributions that participating policies might have. Therefore, option B accurately captures the essence of a non-participating policy.

The other statements do not accurately reflect the key feature of non-participating policies. For instance, while non-participating policies may have a guaranteed cash value accumulation, this feature is not unique to them and varies by policy. Additionally, the absence of dividends does not inherently lead to lower premium costs; rather, it impacts the overall financial structure of the policy.