Participating and non-participating life insurance policies: Differences, all you need to know

Today, India offers a wide variety of life insurance policies. In the tragic occurrence of the insured person’s death, life insurance plans provide financial protection to the insured’s nominees, family, and dependents. With a life insurance policy, the policyholder can have greater peace of mind while ensuring the financial security of their loved ones in the future. The insurance company’s reimbursement will allow the policyholder’s family to make up for the lost income, keeping them mostly in good financial standing. According to section 10D of the Income Tax Act of 1961, the death benefits received under these policies are tax-free, subject to certain conditions. Even though every portfolio needs life insurance, you should educate yourself on its two main kinds, participating and non-participating policies, before making an investment: Participating life insurance policy: A customer can share in the earnings of a life insurance firm by purchasing a participating life insurance policy, sometimes referred to as a par product in the business lingo. To put it in simple terms, a life insurance firm, like most businesses, makes money over time. Customers who have participating policies can share in the company’s annual profits. These perks are often given to clients annually in the form of bonuses or dividends. Non-participating life insurance policy: A conventional life insurance policy, known as a non-par product or non-participating life insurance, offers assured benefits to the customer in accordance with pre-determined selections made by them. This product does not have any clauses that would allow the policyholder to collect a bonus or dividend. Differences between participating and non-participating insurance policies: Here are four major differences between these two kinds of life insurance policies: Profit share: Non-participating life insurance policies do not offer this advantage, whereas participating life insurance plans enable customers to share in the profits of insurance companies. Benefits: The policyholder’s only claim under non-participating plans is for the benefits that the insurer has promised. These consist of the policy’s maturity benefit as well as the death benefit. On the other hand, participating plans offer some non-guaranteed benefits, like bonuses/dividends that the insurer pays out from their profits, as well as guaranteed benefits (death and maturity benefits). Payments: With participating life insurance policies, the policyholder receives annual bonuses or dividends. In the case of non-participating life insurance plans, these extra payments are not offered. Flexibility: In the case of participating life insurance plans, policyholders have the greatest amount of flexibility allowed. Your invested money or assets can be quickly moved around to meet your demands or changes in the market, such as is the case with market-linked policies. Non-participating life insurance plans, however, are restrictive since the benefits that apply remain determined at the moment the policy is issued. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.