What Are Partipcating And Non-participating Plans In Life Insurance?
Updated On Mar 21, 2023
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One of the most important financial instruments, life insurance provides protection to your family members in case of your demise. Apart from providing financial protection, life insurance also provides a bonus depending on your plan type and several other factors. On the basis of this, there are two different types of plans, participating plans, and non-participating plans. So, when it comes to getting additional bonuses/profits, would you not consider comparing the different plans? You would, right? So, in the section below let us walk you through what exactly participating and non-participating plans in life insurance are.
What Are Participating Plans In Life Insurance?
A participating plan in life insurance is also called a par policy that allows the policyholders to take advantage of the profits earned by their insurer. When a policyholder buys a participating plan, they will be eligible to participate in the profits earned by their insurance company. In the form of a bonus or dividends, the benefits earned by the life insurance company are paid out to their policyholders. These bonuses are paid out in different intervals as follows:
- As the insurer earns the profit, the insurer will immediately pay out the benefits earned
- Many insurers pay out the profits on an annual basis
Moreover, you can also use these benefits to pay out your premiums or even invest the earned dividends with your insurer.
What Are Non-participating Plans In Life Insurance?
A non-participating plan in life insurance on the other hand is known as a non-par plan and does not provide any bonus benefits to policyholders. This means that with non-participating plans, you are not eligible to participate in the profits earned by your life insurance provider. Thus, with non-participating plans, no bonus or dividend is paid out to the policyholder during their policy term. Overall, it can be said that there are no guaranteed benefits associated with a non-participating plan.
Difference Between Participating and Non-Participating Plans
Listed below are the basic differences between participating and non-participating plans that you should know about:
|
Point of Difference |
Participating Plans |
Non-participating Plans |
|
Share in profits |
With participating plans, you can take advantage of the profits earned by your insurer |
A non-participating plan does not offer the benefit of taking part in the profits earned by insurer |
|
Payment mode |
The dividends earned in participating plans are paid annually |
There are no such payment modes available in a non-participating plan |
|
Examples |
Unit Linked Insurance Plan or ULIP provides benefits in form of dividends and is a type of participating plan |
A term insurance is an example of non-participating plan |
|
Guarantee of Payments |
The payment of bonuses depends on the profits earned by the insurance company |
A maturity and death benefit is guaranteed with non-participating plans |
|
Premium Cost |
The premium for participating plans are costlier |
As compared to participating plans, the premium for non-participating plans are more affordable |
Thus, after going through the difference between a participating and a non-participating plan, it becomes easier to pick the right plan for yourself.
Take Away
So, whether you are planning to buy a participating plan or non-participating plan, it is best to first understand its benefits and then invest in it. You can also contact as at InsuranceDekho to learn more about the best participating and non-participating plans.
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