What type of life insurance policy offers a return of divisible surplus?

A participating life insurance policy is designed to share in the insurer’s profits, which are distributed to policyholders as dividends. These dividends can represent a portion of the company's divisible surplus, allowing policyholders to receive a financial return based on the insurer's performance. The policyholder can use these dividends in various ways, such as reducing premium payments, purchasing additional coverage, or receiving them as cash.

This feature of sharing surplus is characteristic of participating policies, setting them apart from other types of life insurance, such as term life, which provides coverage for a specific period without a cash value or dividends. Universal life insurance also differs, as it typically focuses on flexible premiums and death benefits but does not offer dividends. Whole life insurance includes cash value accumulation but may or may not be participating. Thus, the key aspect of the participating life insurance policy is its ability to return divisible surplus to policyholders through dividends.