With a participating policy, what financial benefit might a policyholder expect?

A participating policy is one where policyholders are entitled to receive dividends, which are a share of the insurer's excess profits. These dividends are typically based on the financial performance of the insurance company and are distributed to policyholders at the end of the policy year. The amount of the dividend can vary from year to year, depending on various factors such as the company's investment earnings, mortality experience, and expense management.

Policyholders often use these dividends in several ways; they might take them as cash, use them to reduce premium payments, purchase additional coverage, or accumulate them for future use. This characteristic of sharing in the profits distinguishes participating policies from non-participating ones, where policyholders do not receive dividends.

The other choices do not accurately represent the financial benefits provided by participating policies. Lower premiums typically relate more to non-participating policies or term insurance, a fixed death benefit remains the same regardless of profit-sharing features, and limited coverage options do not accurately reflect the nature of participating policies, which can often offer flexible coverage choices.