Simplifying Life Insurance in India
What Are Non-Participating Insurance Plans?
Non-participating insurance plans, also known as non-par insurance, stand as a dependable pillar in the world of financial security. They offer a straightforward and predictable approach to insurance.
Unlike participating plans, where policyholders share in the company's investment profits, non-participating policies provide a fixed set of benefits and are thus well-suited for individuals seeking stability and clarity in their insurance coverage.
Read on to know the key features, benefits, and considerations surrounding non-participating insurance plans thus helping you make an informed decision about safeguarding the financial future of yourself and of your loved ones.
What Is a Non-Participating Life Insurance Policy?
A non-participating life insurance policy offers financial coverage without participation in the insurer's investment profits. Unlike participating policies, non-participating policies do not pay bonuses or dividends. They provide fixed benefits, such as a guaranteed death benefit and maturity benefit.
These policies are an ideal choice for those who seek stability and predictability in their insurance policies and generally have a lower premium as compared to the participating plans.
What Are the Features and Benefits of a Non-Participating Insurance Plan?
Guaranteed benefits
Non-participating plans guarantee death benefit to the nominees selected by their policyholders. If the policyholder survives the policy term, they receive assured maturity benefits as stated while purchasing the plan.No Annual Bonuses
Non-participating insurance plans do not provide dividends even when the insurance company performs well. They do not share in the insurer’s profits rather provide a fixed set of benefits as selected by the policyholder at the inception of the policy.Lower Premiums
Premiums for non-participating policies are often lower than those for participating policies since there are no dividend payments or profit-sharing involved.Cash Value
These plans build cash value over time, often in the form of guaranteed additions, which can be accessed through policy loans, partial withdrawals or surrender, as per the policy conditions. The cash value is, however, guaranteed to grow at a specified rate.Plan Types
Non-participating policies may be available as whole life insurance or limited term insurance, offering options for temporary or lifelong coverage.Deferment Period
Some non-par plans provide an option to choose a deferment period once the premium payment term is over. Post this deferment period, the income period starts for the policyholder, during which they receive the guaranteed returns.Premium Waiver
Some non-par plans, especially when they are designed as a child insurance plan, provide premium waiver benefit, wherein in case of death or critical illness of the policyholder, the future premiums are waived off and the policy continues till maturity.Riders
Most non-par plans provide the option of adding riders to enhance the benefits and coverage of the basic policy.How a Non-Participating Insurance Policy Is Different from Participating Insurance?
Before discussing the differences, let us first briefly know what participating insurance policies are.
Simply put, participating insurance policyholders get profit shares if the insurance company manages surplus revenue. It is designed to provide a dual benefit of insurance cover and corpus growth. In addition to the guaranteed life coverage, participating plan provides non-guaranteed benefits in the form of bonuses.
Now, let’s discuss the significant differences between Participating and Non-Participating plans:
| Basis | Non-Participating Insurance Plan | Participating Insurance Plan |
| Meaning | As a policyholder, you do not participate in the insurance company’s investment profits. Hence the name Non-Participating or Non- Par | As a policyholder, you participate in the insurance company’s investment profits and receive their profit portion as bonus. Hence the name Participating or Par |
| Premiums Charged | Insurance providers charge lower premiums from non-participating policy seekers | Premiums are comparatively higher for participating policy |
| Returns Promised | Registered beneficiaries receive assured death benefits in case the policyholder meets demise within the policy term. In certain cases, the insurer may offer maturity benefits to the insured person at the end of the plan’s tenure |
Participating insurance buyers enjoy periodic bonus payments apart from maturity benefits, if the insurance company makes profits. Besides, just like non-participating plans the beneficiaries are entitled to death benefits |
| Long-Term Costs | Long-term costs are more as there are no additional bonuses attached to a non-participating plan | Long-term costs are less as you get yearly bonuses that appreciates as per cash value policy |
| Risk factor | These plans come with little to no risk and the beneficiaries get assured death benefits | Minor risk is there as a part of your money gets invested in different financial securities, like bonds. |
Par or Non-Par Insurance Plan: Which One is Ideal for You?
Depending on your needs you should either go for a participating or non-participating plan. Again, to make an informed purchasing decision, it is recommended that you know their individual strong points.
A participating plan is ideal for you if:
- You expect attractive yearly returns in addition to basic life coverage.
- You are open to taking moderate risk to benefit from the insurer’s profit sharing.
- You are looking forward to gaining tax benefits over long-term investments.
On the other hand, a non-participating insurance plan is ideal for you if:
- You are more of a safe-minded investor who looks to avoid risk-oriented investments.
- The intention is only to ensure the beneficiaries receive a guaranteed death benefit.
- You are looking for family's financial stability than an investment for wealth creation.
FAQs About Non-Participating Insurance Plan
Do Non-Participating Insurance Plans Guarantee Maturity Payouts?
Is it Worth Buying a Non-Participating Life Insurance?
What if I'm Unable to Pay my Premiums During the Premium Payment Term?
There can be several results in such cases:
i) Lapse
In case you are unable to pay your premium by the due date and even after the grace period, your policy lapses if it has not acquired a paid-up value.
When a policy comes in a paid-up value, it continues with reduced paid-up benefits.
There is also a reinstatement period after policy lapse wherein the policy can be restarted upon payment of all due premiums and additional charge, if any.
ii) Surrender
A regular pay policy acquires a surrender value after two years of premium payment. Post this, it can be surrendered. However, a single premium policy acquires a surrender value within the first year of the policy itself.
iii) Partial Withdrawal
Some plans provide the option of partial withdrawal after which the policy continues with reduced benefits.
What is the Grace Period in Non-Par Plans?
Important Guides related to Life Insurance
Disclaimer
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.
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