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Question: 1 / 470

What is a characteristic feature of participating insurance policies?

Higher premium rates

Guaranteed death benefits

Payment of dividends to policyowners

Participating insurance policies are designed to allow policyholders to share in the insurer's profits through the payment of dividends. These dividends are a key characteristic and advantage of participating policies, as they provide policyowners with a return on their investment in the form of cash payments, reduced premiums, or additional insurance coverage. The ability to receive dividends distinguishes participating policies from non-participating ones, where policyholders typically have no entitlement to share in the insurer's profit.

This feature reflects the mutual nature of many participating policies, where the policyholders are also considered members of the insurance company, enabling them to benefit from its overall financial performance. Hence, the payment of dividends is a notable feature that aligns with the principles of mutual insurance practices, enhancing the value of the policy for the owner in the long run.

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