Personal Finance

Term of the Day: Participating and non-participating policy

| Updated on December 03, 2019 Published on December 03, 2019

Insurance policies with a saving component (endowment or money-back plans) are of two types — participating and non-participating. In participating plans (also called with-profit plans), policyholders get a share of the profits of the company provided the company makes a profit and declares a bonus. Participating plans 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 that depends on the bonus. In non-participating plans (also called non-par or without-profit plans), policyholders don’t get to share the insurer’s profits. But returns are guaranteed upfront by way of additions to the cover under the policy.

So, the policyholder can know his/her returns at the time of signing up for the policy, without any complex calculation.

Published on December 03, 2019
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