Life Insurance

What is the difference between participating and non-participating policy?

When you go shopping, you compare different options, choose the best out of the lot and then negotiate for the right price. So why not compare two different types of policies—participating and non-participating policies—while buying life insurance? This will enable you to make an appropriate choice according to your needs.

Highlighted below are some differences between both the types of insurance policies:

	Participating policy	Non-participating policy
Meaning	A participating policy enables you as a policy holder to share the profits of the insurance company. These profits are shared in the form of bonuses or dividends. It is also known as a with-profit policy.	In non-participating policies the profits are not shared and no dividends are paid to the policyholders. This type of policy is also known as a without-profit or non-par policy.
Payment	The bonus that is given in this policy is not guaranteed. It is based on the performance of the insurance company.	In case of a non-participating policy, there is no bonus or dividend paid to the policyholder.
Payment guarantee	The bonuses or dividends are usually paid out annually.	There are no payments in non-participating policies because the profits are not shared.
Benefits	The most important benefit of participating policies is that it not only provides protection, but also provides returns in the form of a bonus.	The premiums are a little lesser than participating policies.
Examples	ULIPs or Unit Linked Insurance Plans that pay bonuses or dividends can be classified as participating policies.	A term insurance or permanent life insurance policy is a non-participating policy.

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