How are dividends usually distributed in a participating life insurance policy?

In a participating life insurance policy, dividends are typically distributed as a reduction of premium. This means that policyholders have the option to use their dividends to offset future premium payments, effectively lowering the cost of the insurance while keeping the policy in force. This feature is distinctive to participating policies, which are designed to pay dividends to policyholders based on the insurer's overall financial performance.

Choosing to apply dividends as a premium reduction allows policyholders to maintain their cash flow while still benefiting from the insurance coverage. It's also worth noting that although dividends can be taken in other forms, such as cash or used to purchase additional insurance, the option to reduce future premiums is particularly appealing for policyholders seeking long-term affordability and value from their coverage.