<P> When discontinuing a policy, according to Standard Non-forfeiture Law, a policyholder is entitled to receive his share of the reserves, or cash values, in one of three ways (1) Cash, (2) Reduced Paid - up Insurance, or (3) Extended term insurance . </P> <P> All values related to the policy (death benefits, cash surrender values, premiums) are usually determined at policy issue, for the life of the contract, and usually cannot be altered after issue . This means that the insurance company assumes all risk of future performance versus the actuaries' estimates . If future claims are underestimated, the insurance company makes up the difference . On the other hand, if the actuaries' estimates on future death claims are high, the insurance company will retain the difference . </P> <P> Non-participating policies are typically issued by Stock companies, with stockholder capital bearing the risk . Since whole life policies frequently cover a time span in excess of 50 years, it can be seen that accurate pricing is a formidable challenge! Actuaries must set a rate which will be sufficient to keep the company solvent through prosperity or depression, while remaining competitive in the marketplace . The company will be faced with future changes in Life expectancy, unforeseen economic conditions, and changes in the political and regulatory landscape . All they have to guide them is past experience . </P> <P> In a participating policy (also "par" in the United States, and known as a "with - profits policy" in the Commonwealth), the insurance company shares the excess profits (divisible surplus) with the policyholder in the form of annual dividends . Typically these "refunds" are not taxable because they are considered an overcharge of premium (or "reduction of basis"). In general, the greater the overcharge by the company, the greater the refund / dividend ratio; however, other factors will also have a bearing on the size of the dividend . For a mutual life insurance company, participation also implies a degree of ownership of the mutuality . </P>

Whole life insurance does not have a cash value for the insured