Which factor could lead to a higher premium for participating policyholders?

The correct choice highlights a key aspect of participating policies, which are designed to share the insurer's profits with policyholders in the form of dividends. Participating policyholders typically pay higher premiums compared to non-participating policyholders, as they are essentially investing in a policy that not only provides a death benefit but also has the potential to generate additional value through dividends.

Dividends can provide a return on the premium paid, rewarding policyholders for their loyalty to the insurer. This expectation contributes to the higher premium since the insurer must account for the possibility of distributing these dividends when setting the policy's premium rates. Participants are essentially buying into a system where they share in the financial success of the insurer, thereby influencing the overall cost of their insurance coverage.

In contrast, other factors such as annual income benefits or the type of insurer play different roles in determining the cost of insurance but do not directly reflect the sharing of the insurer's profits or financial results. While the potential for higher payouts may influence a policy's overall appeal, it does not specifically address the profitability sharing mechanism that leads to higher premiums for participating policyholders.