In a non-linked insurance plan, you get to ensure a fixed maturity amount. Since you know how much you will get after the terms, you will be able to plan your bigger expenses accordingly. For example, the amount can help you bear the expenses incurred in the wedding of your son and daughter.
All You Need to Know About Non-Linked Insurance Plan
What is Non-Linked Insurance Plan?
A non-linked insurance plan is a traditional insurance policy in which you do not hold a portfolio of funds. As a result, your money does not get directly linked with the stock market or other investment instruments.
Instead, your premium amount stays with the insurance provider. The insurer decides where it will invest the amount as per its experts' suggestions. However, benefits like the sum assured and maturity amount do not fluctuate according to the market situation. Beneficiaries will get the amounts as determined during the policy purchase.
Features of Non-Linked Insurance Plan
Here are some unique features of this type of insurance plan
Guaranteed Benefits: You can decide how much sum assured and maturity benefits you would like to have while purchasing a policy. If the claims meet the inclusion criteria of the policy, you will receive the same amount as previously decided.
No Impact of Market Fluctuation: As your premiums do not stay invested directly in the stock market, you need not worry about the current market situation. Even if there is a bearish market, you will get the same benefit as determined while purchasing this policy. Therefore, you do not need to bear any risk.
Affordable Premium: The premium amount is also low. The entire amount you pay goes directly towards your insurance scheme, not in any investment instrument. Therefore, you can easily secure a high sum assured at a low budget.
How Do Non-Linked Insurance Plans Differ From Linked-Plans?
While purchasing a life insurance policy, you will find both linked and non-linked plans. To ensure that the policy you purchase will meet your requirements, you need to understand each of these plans in detail.
Here are some of the notable differences between linked and non-linked insurance plans:
|Linked Insurance Plan
|Non-Linked Insurance Plan
|In this type of life insurance plan, you have the option to choose the type of fund in which a portion of your premium will stay invested.
|You cannot choose the fund type where your insurance company will invest your premium.
|Since your money is put into open investment instruments like company shares and bonds, you need to depend on market performance.
|Your insurance company invests your premium at their discretion and bears all the risks and opportunities. Even if they make a loss or profit, you will get the predetermined policy benefits.
|The utilisation of the premium amount is transparent in a linked-insurance plan. You can see and track your investment portfolio. Further, you can change your fund type as per the current market situation if you stay alert.
|In a non-linked insurance plan, you do not know where and how your insurer leverages the premium. You do not get a fund portfolio which you will need to track.
|This plan comes with the facility of withdrawing a certain percentage of accumulated funds after a predetermined lock-in period. This way, you can leverage your fund to cope with emergencies.
|A non-linked insurance plan does not have a partial withdrawal facility. If you are in dire financial need, you can surrender your policy. Alternatively, you can take loans against this policy.
If you are looking for a policy with guaranteed sum assured and maturity benefits, you can purchase a non-linked insurance plan. With this kind of policy, you do not have to cope with any market fluctuation. Thus, it reduces much of your time and concern about switching funds. Furthermore, with the affordable premium amount, you can easily continue your policy and get life cover for your family.
Which One to Choose - Linked or Non-Linked Insurance Plan?
While determining whether to buy a linked or non-linked insurance plan, you need to consider your risk tolerance. The non-linked insurance plans provide a fixed maturity amount.
Contrarily, in a linked insurance plan, the maturity amount varies, depending on the fund where the insurance company puts your money. Keeping aside the risk, a linked insurance policy can help you gain a higher interest than its counterpart if the fund performs as expected.
So, if you are a risk-averse person, the non-linked insurance plan may be suitable for you. Otherwise, you can go with the linked insurance plan.
FAQs about Non-linked Insurance Plans
Unit-linked Insurance Plan or ULIP is a policy in which the insurance company shares your premium between life cover and a market fund. This fund can be equity-based or debt-based. You get the right to choose the type of fund in which you would like to invest in. Therefore, besides getting the life cover, the insurer also lets you obtain the aggregate value of your fund.
You may need to give the following documents to your insurance company while purchasing a linked insurance policy:
- Age proof
- Residential proof
- Medical diagnostics reports
- Photo identity proof
- PAN card
- Income proof
Important Guides related to Life Insurance
- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
- All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
- Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.