Participation Rate
What Does Participation Rate Mean?
The participation rate is the percentage of returns a policyholder receives on an equity-indexed annuity. Many life insurance companies offer annuities as an investment opportunity, and they determine the participation rate for policyholders. The higher the participation rate, the greater the percentage of earnings the policyholder will receive from the annuity.
Insuranceopedia Explains Participation Rate
Annuities, an insurance product that generates a fixed income later in the buyer’s life, are typically reserved for retirement. In the case of equity-indexed annuities, both the performance of the investments and the participation rate determine the payments the policyholder receives. For example, if the equities in an equity-indexed annuity increase by 100% and the participation rate is 50%, the policyholder will receive 50% of the increased value. Individuals looking to maximize their investment may want to seek annuities with higher participation rates.
