What type of policy shares its surplus with policyholders?

A participating policy is designed to share its surplus with policyholders. This means that policyholders have the opportunity to receive dividends, which can be a portion of the insurer's profit. In essence, participating policies are typically associated with mutual insurance companies that operate for the benefit of their members. When the company performs well, policyholders can benefit financially through these dividends, enhancing the overall value of their policy.

In contrast, non-participating policies do not offer this benefit; they operate without sharing surplus profits, making them a more straightforward form of insurance where premiums and benefits are clearly defined. Commercial insurance policies can vary widely, but they generally do not share profits in the same way as participating policies. Lastly, universal life insurance, while it may have cash value components and offers flexibility in premium payments and death benefits, does not inherently involve the sharing of surplus in the form of dividends; it is more geared towards managing cash value over time.