What is the Difference between Participating and Non-Participating Life Insurance?

Since the pandemic, undertaking financial management has become evident and essential.

life insurance plans

People have a better understanding of term insurance policies compared to wealth accumulation products. While life insurance plans are pretty popular, we must know more about insurance before getting into it. It can be a little confusing for people and more so for new customers. We have reached a point of inflection in our life insurance story. It was an instrument with very low awareness, and people are getting to know more about it lately. Since the pandemic, undertaking financial management has become evident and essential. A new type of customer has come forward in the insurance industry. This customer is savvy, younger, and more inclined towards financial planning, expecting solutions that would address their financial needs. Educating this new customer about life insurance plans and solutions is imperative. 

Also ReadEverything you need to know about life insurance.

Participating Insurance Plans

Participating insurance plans are considered a par product in the insurance industry. A customer can be part of a life insurance company's profits. Like most other companies, a life insurance company earns profits over time. Participating insurance plans or policies allow the customers to reap benefits for a company's profits. Customers get these benefits in the form of dividends or bonuses annually. These benefits are different from the guaranteed maturity benefits that life insurance plans or policies offer. Companies might pay such dividends or bonuses after the policy matures. Customers can let the bonus amount accumulate till they don't require funds. 

What is Non-Participating Life Insurance?

So what is non-participating life insurance? It is known as a product that is non-par in the insurance industry. It is conventionally a life insurance plan or solution offering its customers guaranteed benefits based on the choices a customer makes beforehand. The customer does not receive any dividend or bonus under this plan.

Also ReadTerm insurance vs. traditional life insurance. 

Difference between Participating and Non-Participating Life Insurance

Here is the difference between participating and non-participating life insurance. Let's dive in! 

Share in the Profits

It is the main difference between the two solutions. A par product will allow a customer to be a part of the business' profits, while a non-par product has no such option.

Nature of Benefits

You get guaranteed benefits with a non-participating product. Depending on its composition, it includes a death benefit, guaranteed income payouts, or maturity payouts. 

On the other hand, a participating policy provides non-guaranteed and guaranteed components. The future payouts can't be calculated as the dividends or bonuses depend on a company's performance. 

Risk Level

Par products are considered to be high-risk compared to non-par products. However, there has not been a case when a customer has lost money on his investment in a life insurance plan or policy. Guaranteed payments are a feature of a non-par plan along with fixed benefits. On the other hand, future payouts can't be calculated or guaranteed as the dividends or bonuses depend on a company's performance. It is why the premium rate is lower for non-par products. Research is essential, but market information cannot be enough without you knowing your financial needs. You can only make proper financial decisions once you know your long and short-term financial needs. Some companies in the life insurance industry have started providing personalized solutions. You can control the benefit's timing to meet any requirements. 

Also ReadDifference between term and whole life insurance.

It solely depends on whether you want a par or non-par product depending on your financial needs. You must gather enough information before getting into it to reap the maximum benefits. The significant difference between the two is dividend and bonus payments which one plan provides and the other does not. 

People have a better understanding of term insurance policies compared to wealth accumulation products. While life insurance plans are pretty popular, we must know more about insurance before getting into it. It can be a little confusing for people and more so for new customers. We have reached a point of inflection in our life insurance story. It was an instrument with very low awareness, and people are getting to know more about it lately. Since the pandemic, undertaking financial management has become evident and essential. A new type of customer has come forward in the insurance industry. This customer is savvy, younger, and more inclined towards financial planning, expecting solutions that would address their financial needs. Educating this new customer about life insurance plans and solutions is imperative. 

Also ReadEverything you need to know about life insurance.

Participating Insurance Plans

Participating insurance plans are considered a par product in the insurance industry. A customer can be part of a life insurance company's profits. Like most other companies, a life insurance company earns profits over time. Participating insurance plans or policies allow the customers to reap benefits for a company's profits. Customers get these benefits in the form of dividends or bonuses annually. These benefits are different from the guaranteed maturity benefits that life insurance plans or policies offer. Companies might pay such dividends or bonuses after the policy matures. Customers can let the bonus amount accumulate till they don't require funds. 

What is Non-Participating Life Insurance?

So what is non-participating life insurance? It is known as a product that is non-par in the insurance industry. It is conventionally a life insurance plan or solution offering its customers guaranteed benefits based on the choices a customer makes beforehand. The customer does not receive any dividend or bonus under this plan.

Also ReadTerm insurance vs. traditional life insurance. 

Difference between Participating and Non-Participating Life Insurance

Here is the difference between participating and non-participating life insurance. Let's dive in! 

Share in the Profits

It is the main difference between the two solutions. A par product will allow a customer to be a part of the business' profits, while a non-par product has no such option.

Nature of Benefits

You get guaranteed benefits with a non-participating product. Depending on its composition, it includes a death benefit, guaranteed income payouts, or maturity payouts. 

On the other hand, a participating policy provides non-guaranteed and guaranteed components. The future payouts can't be calculated as the dividends or bonuses depend on a company's performance. 

Risk Level

Par products are considered to be high-risk compared to non-par products. However, there has not been a case when a customer has lost money on his investment in a life insurance plan or policy. Guaranteed payments are a feature of a non-par plan along with fixed benefits. On the other hand, future payouts can't be calculated or guaranteed as the dividends or bonuses depend on a company's performance. It is why the premium rate is lower for non-par products. Research is essential, but market information cannot be enough without you knowing your financial needs. You can only make proper financial decisions once you know your long and short-term financial needs. Some companies in the life insurance industry have started providing personalized solutions. You can control the benefit's timing to meet any requirements. 

Also ReadDifference between term and whole life insurance.

It solely depends on whether you want a par or non-par product depending on your financial needs. You must gather enough information before getting into it to reap the maximum benefits. The significant difference between the two is dividend and bonus payments which one plan provides and the other does not. 

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