Which is the difference between participating and non-participating policies?

Participating policies are a type of insurance where policyholders are eligible to receive dividends based on the insurer's financial performance. These dividends are distributed because participating policies are typically associated with mutual insurance companies. The rationale is that policyholders are considered stakeholders in the company’s profits, and thus, they benefit from the company’s success.

In contrast, non-participating policies do not share in the insurer’s profits and do not pay dividends to policyholders. Instead, the premiums for non-participating policies are generally fixed and do not fluctuate based on the performance of the insurer.

The other options do not accurately capture the key distinction between participating and non-participating policies. While participating policies may often be more expensive due to the potential for dividends, this is not a definitive characteristic that solely defines them. Non-participating policies can have cash value depending on the specific type of policy; for instance, some term policies may not have cash value, but this is not universal among non-participants. Lastly, the notion that participating policies are only offered by government insurers is incorrect, as both mutual and stock insurance companies typically provide such policies.