Tennessee Insurance Exam 2025 – 400 Free Practice Questions to Pass the Exam

A participating insurance policy is designed to allow policy owners to share in the profits of the insurance company. This is achieved through the payment of dividends to policyholders, which are often based on the company's financial performance. Being a participating policy means that policyholders have a vested interest in the profitability of the insurer, as these dividends can serve as a return on premiums paid.

In contrast, lower premiums are typically associated with non-participating policies, where policyholders do not share in the insurer's profits and thus pay a fixed premium rate. While a policy might specify what risks it covers, this characteristic alone does not define a participating policy, as many insurance products cover specified risks without having dividend distributions. Similarly, temporary coverage plans focus on providing limited-time insurance solutions, which is distinctly different from the nature of participating policies that are often permanent or long-term in structure.