Question

A participation insurance policy may do which of the following?

1) Require 80% participation
2) Pay dividends to the policy owner
3) Provide group coverage
4) Pay dividends to the stockholder

Answer 1

A participation insurance policy may provide group coverage and require 80% participation. It does not pay dividends to the policy owner or the stockholder.

Step-by-step explanation:

A participation insurance policy may provide group coverage and require 80% participation. However, it does not pay dividends to the policy owner or the stockholder. Insurance policies often require the insured party to pay a share of the costs, such as deductibles or coinsurance, to reduce moral hazard.