There are two main types of life insurance policies that pay dividends: whole life insurance and participating life insurance. Whole life insurance is a permanent policy that provides a guaranteed death benefit and a cash value component that grows over time. Participating life insurance, on the other hand, is a type of permanent life insurance that offers policyholders the opportunity to receive dividends, which are typically paid annually. These dividends can be used to reduce premiums, purchase additional coverage, or be withdrawn as cash. It's important to note that not all participating life insurance policies pay dividends, and the amount and frequency of dividend payments can vary between companies and policy types. Therefore, it's essential to carefully review the terms and conditions of any policy you're considering before making a decision.