Insurance Uncovered

Rajalakshmi Nirmal | Updated on October 22, 2019

What are ‘guaranteed’ and ‘non-guaranteed’ benefits in a life insurance policy? Also, is there any difference between an exclusive guarantee policy and the usual guaranteed plan in life insurance?

R C Yadav

Insurance policies that have a saving component to them, say endowment or money-back policies, are of two types — participating plans and non-participating plans.

While in non-participating plans, the benefit is guaranteed, in participating plans, it is not.

Let me explain this:

In a participating plan, policyholders get a share of the profits of the insurance company, provided, the insurer makes profit and declares bonus. These policies give a benefit illustration in the policy brochure, with gross return of 4 per cent and 8 per cent and show the maturity value. But beware, don’t take them at face value. The exercise is only for illustrative purposes. There is no way of knowing the returns beforehand as the returns depend on the bonus. In non-participating plans, policyholders don’t get share in profits of the company, but returns are guaranteed upfront by way of what is called ‘guaranteed additions’. So, the policyholder can know his returns at the time of signing up for the policy. The recently launched plan from HDFC Life – Sanchay Plus, is also a guaranteed plan.

Now, coming to your second question, there is no such thing called as an ‘exclusive’ guarantee in life insurance policies. If you e-mail details of any such plan, we may be able to explain to you how it works.

Published on October 22, 2019

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