Who Sells Life Insurance?

More than 2,000 companies in the United States sell life insurance. They range in size and services from large companies that sell to all segments of the public to smaller companies that provide coverage tailored to a specific group. Most insurance companies sell their policies through a network of producers. In three states (New York, Massachusetts and Connecticut), some savings banks sell life insurance. Some insurance companies offer policies by mail. Life insurance companies sell either "non-participating" or "participating" policies.

Most non-participating policies have fixed payments -- premiums -- based on what the company believes it will cost to provide insurance protection. Some newer non-participating policies have premiums that may be changed periodically, subject to a maximum rate stated in the policy. The amount of the premium charged for a non-participating policy depends on what the company believes it will cost to provide coverage to the policy holder.

Participating policies, on the other hand, have somewhat higher premiums with a built in "cushion" to allow for fluctuations in the company's earnings and expenses. At the end of the year, the company computes its actual costs and refunds to the policyholder any portion of the premium it does not need. The refund is called the "policy dividend." Those who buy participating policies can expect their cost to be "reduced" through periodic policy dividends, which are not taxable.