What type of life insurance allows policyholders to participate in the company's profits?

Participating policies allow policyholders to participate in the profits of the insurance company. This means that policyholders can receive dividends, which are a share of the company's profits distributed among those who hold participating policies. These dividends can be taken as cash, used to reduce premiums, or reinvested in the policy through paid-up additions.

In the context of life insurance, participating policies are often associated with whole life insurance, which provides lifelong coverage and also accumulates cash value over time. The participation in profits is a key feature that distinguishes these policies, as it offers an opportunity for policyholders to receive financial benefits beyond just the death benefit.

On the other hand, non-participating policies do not share in the company's profits, and term life policies typically offer lower-cost coverage for a specified term without any cash value accumulation or dividends. Thus, the choice of participating policies accurately reflects the characteristic of allowing policyholders to share in the company's profitability.