Question

John owns an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this?

Answer 1

A participating policy is a type of insurance policy that allows the policyholder to share in the insurer's surplus. In this type of policy, the policyholder may receive dividends or reduced premiums based on the insurer's financial performance.

Step-by-step explanation:

This kind of policy is called a participating policy. In a participating policy, the policyholder has the right to share in the insurer's surplus, which is the amount left over after the insurer has paid claims and expenses.

This surplus is usually distributed to policyholders in the form of dividends or reduced premiums.

For example, let's say John owns a participating life insurance policy. If the insurer's financial performance is strong and there is a surplus, John may receive a dividend payment.

This can be in the form of a cash payment or it may be used to reduce future premium payments.