Which type of life insurance policy distributes its surplus after accounting for company reserves and liabilities?

A participating policy is designed to allow policyholders to share in the insurer's profits. After the company accounts for its reserves and liabilities, any surplus is distributed among participating policyholders in the form of dividends. This distribution is a key feature of participating policies, making them attractive to individuals who seek not only death benefits but also the potential for additional financial returns over time. These dividends can be utilized in various ways, such as reducing premiums, accumulating interest, or purchasing additional coverage, thereby providing policyholders with flexibility in managing their life insurance benefits.

In contrast, non-participating policies do not offer this benefit, as they do not share their surplus with policyholders, and holders of industrial or commercial insurance policies typically focus on basic coverage without profit-sharing provisions.