The suitability of participating and non-participating life insurance plans depends heavily on your financial goals and future plans. Therefore, before deciding on which one to choose, it would help if you have an insight into their benefits and utilities.
Based on Type of Returns
For instance, participating insurance policies such as ULIPs may be advantageous as they offer the dual benefit of good returns as well as life coverage. But in case of non-participating plans, you only receive a guaranteed return.
However, note that these returns depend on how the insurance company performs in the market and other variables. Therefore, if you are opting for this type, you must be aware of market conditions and how your insurer is performing. Moreover, based on your financial goals or requirements, you can transfer the invested assets depending on their market performance.
Based on Risk Appetite
This plan can be beneficial for those with a moderate risk appetite and for those who would like to earn extra income while securing their loved ones financially. Non-participating insurance policies, on the other hand, work as traditional plans where your near and dear ones will receive a predetermined sum assured in case of your unfortunate demise.
So, if you are looking for guaranteed life coverage at cost-effective premiums, this is a favourable option. Moreover, with non-par policies, you do not have to worry about the market environment or how your insurance company is performing.
Finally, the difference between participating and non-participating insurance reveals that both options have their own value depending on the requirements of the policyholder. As such, a participating insurance policy will not be constructive if the market conditions are volatile and there is a risk that your insurer will not generate any profit.
In such situations, you can go for a non-par plan. However, when opting for the second, know that you will not be entitled to any extra income apart from a fixed sum assured.