In a participating policy, what financial benefit is offered to the policyholder?

In a participating policy, the financial benefit offered to the policyholder is the chance to receive dividends. Participating policies are specifically designed to allow policyholders to share in the insurance company's profits. These profits are typically distributed in the form of dividends, which can be paid out annually based on the company's performance.

The dividends are not guaranteed, as they depend on the company's overall earnings, but policyholders often receive a portion of the profits when the company performs well. This feature distinguishes participating policies from non-participating policies, where policyholders do not share in the company’s profits and therefore do not receive dividends.

The involvement of policyholders in the company's profits through dividends can provide a sense of ownership and incentivizes the policyholders to remain with the policy over the long term. These dividends can be used in various ways, such as applying them toward premium payments, purchasing additional coverage, or being taken as cash.

In contrast, other options do not accurately represent the financial benefits of a participating policy, as they either imply the absence of additional benefits, guarantee payouts without the possibility of dividends sharing, or focus solely on cash value increases rather than the potential for profit-sharing through dividends.