Anyone searching for a low-risk pure life cover can buy a non-linked non-participating term insurance policy at an affordable premium. In addition, it guarantees death benefits to the nominee, as the risk elements have nothing to do with market performance.
What are Non-Linked Non-Participating Insurance Plans?
Securing your family’s future for times when you will not be around is a big concern, as the cost of essentials keep rising rapidly. A traditional strategy is buying a term insurance plan that provides adequate coverage at affordable premiums.
Though term insurance plans have existed for many decades, terms like ‘non-linked non-participating’ can be overwhelming for those searching for comprehensive policies online. To simplify things, we have defined these schemes here and discussed their unique features and benefits.
What is Non-Linked Insurance Policy?
Before understanding a non-linked non-participating life insurance plan, let us first perceive the meaning of the term 'non-linked'. Non-linked plans ensure definite coverage to consumers, who pay fixed premiums throughout the policy term.
These plans do not depend on the market performance of any principal assets. Thus the associated risks of a policyholder get mitigated significantly as even if the market underperforms at a particular stage, their coverage remains unchanged. Moreover, if a person purchases a non-linked term plan, their nominee will receive the promised sum if they meet an unforeseen demise within the plan term.
What is Non-Participating Insurance Policy?
Non-par or non-participating is the next element we encounter while discussing non-linked non-participating insurance plans. Simply put, buyers who go for a non-participating term plan will have no part in the insurer’s business profit and overall market capitalisation.
If you purchase a non-participating insurance policy, you will not be entitled to any add-on benefits other than the assured maturity sum or death benefit. Generally, pure-term policies that do not announce profit or bonus distribution among their clients are examples of non-participating term plans.
Linked insurance plan purchasers can appeal for extra bonuses or even an elevated annual return within their policy term when their insurer earns higher profit from the market. However, this option is not valid if you are a non-linked insurance plan holder.
Though this may seem disheartening, bagging a non-linked term plan can greatly reduce financial stress. This is because even when you will not be around anymore, your family will receive an assured lump sum regardless of the insurance company’s market condition at that point.
What are the Features and Benefits of a Non-Linked Non-Participating Insurance Plan?
1. These schemes are independent of the performance of a particular asset classMost people purchase a non-linked non-participating term plan because secondary market factors will not affect their assured sum. These schemes are ideal for securing your family's future by ensuring the nominee receives the entire promised sum following your unfortunate demise. You can establish each family member's financial well-being by purchasing a comprehensive non-linked non-participating term policy.
2. Beneficiaries get adequate lump sum coverage at affordable premium rates
Most of these policies come with nominal premium charges. However, the exact premium depends on several factors like the policyholder’s age, lifestyle habits, medical history, etc.
As you pay the quoted premium throughout the policy term, the insurer guarantees to take care of your family in your absence financially.
3. The risk profile is low in these plans
It is the most significant factor distinguishing a non-linked plan from a linked insurance policy. Although financial experts monitor and allocate the funds for linked-term plans, certain risk elements remain depending on market conditions.
Contrarily if you are spending money to purchase a non-linked non-participating insurance policy, the associated risk factors are negligible. Moreover, you receive guaranteed returns.
FAQs about Non-linked Non-participating Term Plans
Insurance companies do not share profits with clients who buy non-participating or non-par policies. Hence these term plans do not offer dividend shares.
Par term plans guarantee an annual dividend payout to all the policyholders. In comparison, non-par term plans are without-profit schemes, only ensuring a death benefit to the beneficiary if the policyholder meets their demise within the policy period.
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.