Difference Between Linked and Non-Linked Insurance

What is Linked Insurance?

What is Non-Linked Insurance?

What are the Differences Between Linked and Non-Linked Insurance?

We have concisely listed the differences between a linked and non-linked insurance policy to help potential life insurance buyers make a well-informed purchase decision.

Parameter Linked Insurance Plan Non-linked Insurance Plan
End benefit Linked insurance purchasers receive the monetary compensation of their acquired units at the current market price as soon as the policy matures. Moreover, when the insurer promises to offer additional units post-maturity of the policy term, the investor gets surplus returns in the form of loyalty bonuses. Non-linked insurance plans specify a guaranteed payout on the day the policy term commences. The insured person is not entitled to any additional benefits as they do not intend to participate in the stock market activities of the insurance provider.
Partial withdrawal You can withdraw about 10% of your premiums paid to date to support emergency financial expenses. However, one must contact the insurance provider or read their insurance policy terms thoroughly to know the exact withdrawal limit. The insurance buyer is only allowed to take a loan against the sum assured by the insurer. In addition, no insurance provider allows a person to withdraw a certain amount of their premiums paid for non-linked plans.
Investment flexibility These plans are very flexible in terms of investment. The policyholder gets the choice-making authority on which funds the plan must invest. Thus, it is an excellent alternative to term plans if you are a moderate risk taker ready to place bets on odds related to the stock market. The insurer allocates the funds accumulated from all the retail investors into assets of their choice. The policy buyer has almost no control over the nature of investments.
Transparency While choosing between a linked and non-linked insurance policy, this factor speaks highly in favour of buying a linked policy as these plans are highly transparent. The insurer regularly sends the policyholders detailed reports on the total premiums paid and the number of units possessed. These plans have little to zero transparency, as insurance buyers have no clue where their money gets invested.
Switching options ULIP plan holders can switch their funds without additional charges. Thus if someone wants to lower their risk factor, they can request shifting their funds to debt funds from the high-risk involved equity funds. This option is not valid for any non-linked insurance policy.

Which Life Insurance Policy is Better for You?

FAQs about Linked and Non-linked Insurance

How linked insurance policies help in goal-based savings?

As linked insurance policies are subject to market risks, investors usually consider them for long-term gains in exchange for systematic investments. Thus, these plans help individuals fulfil their primary life goals, like buying a house, by mitigating the risks over a prolonged period.

Can you withdraw accumulated funds in a linked insurance plan?

Yes, one can make partial withdrawals showing genuine reasons. Once you duly serve the lock-in period, no such criteria restrict the withdrawal of accumulated funds. Therefore, investors consider this factor as an advantage of investing in ULIPs.

What are market linked insurance plans?

These are ULIPs that aim to maximise returns by investing partial funds of each insured person in the stock market. If you have bought market linked insurance policies, you receive dividends besides the guaranteed death benefits entitled to the beneficiaries.

What are the main features of a non linked non participating insurance plan?

These plans guarantee a definite life coverage as the funds are not allocated for investments in the secondary market. Apart from this assurance, the policyholders are not entitled to dividend payments as they intend not to participate in the commercial affairs of the insurer.