When you’re exploring the world of life insurance, one term you might frequently encounter is “participating funds.”
These funds are crucial to many life insurance policies, and understanding them can significantly impact your financial planning.
Let’s delve into what participating funds are and why they matter to you as a policyholder.
What Are Participating Funds and How Does it Work?
Participating funds, often referred to as “par funds,” are investment pools managed by life insurance companies.
When you buy a participating life insurance policy, a portion of your premiums goes into these funds.
These funds are more than just a savings component; they are a dynamic investment mechanism that can significantly impact the value of your policy.
Here’s a closer look at how participating funds work:
Premium Allocation and Investment
Each premium payment you make is not solely for insurance coverage; a significant portion is channelled into the participating fund managed by the insurer....