Which policy is issued by a mutual insurer and provides a return of dividend surplus?

• A. Nonparticipating life insurance policy
• B. Participating life insurance policy
• C. Endowment policy
• D. Variable life insurance policy

Answer: (B)

Mutual insurers often return a portion of their profits to policyowners through participating policies. A participating policy is eligible to receive dividends from the insurer’s surplus when there are excess earnings after paying claims and expenses. These dividends come from the company’s financial results and aren’t guaranteed, but they can be received as cash, used to reduce premiums, or purchase additional paid-up insurance. This feature—sharing the insurer’s surplus with policyholders—is what distinguishes participating life insurance from other types. Nonparticipating policies don’t pay dividends, endowment policies are a specific maturity/death-benefit structure (and may be participating or not, but don’t define mutual surplus sharing), and variable life relies on the performance of investment accounts rather than declared dividends from surplus.