Life insurance companies offer both participating and non-participating insurance policies. The policies are quite different from each other. So, it is very important for you to know the basic difference between them before you invest so that you get the perfect policy you are interested in.
Difference between Participating & Non Participating policy.
Participating policies pay dividends to the policy holders i.e. the policyholders are "participating" in the company profits which the company pays as dividends. Non-Participating policy does not provide any dividends and the policyholders does not participate in company profits.
Non-Participating policy is inflexible.
Non-Participating policies are inflexible ones than the participating policies. All the benefits are fixed at the time of issuance of the policy. Once the policy is issued by the insurance company then further modifications cannot be made.
Guaranteed Vs Non-Guaranteed Benefits.
Non-Participating policy provides only guaranteed benefits. On the other hand, participating policy provides guaranteed as well non-guaranteed benefits. Guaranteed benefit is the sum assured payable upon maturity or death of the policyholder. Non-guaranteed benefit includes bonuses and cash dividends.
Secured Vs Unsecured Returns.
Non-participating policy is somewhat secured. Participatory policy is less secure in the sense that the future bonuses are not guaranteed. So, in non-participating policy you need not worry about paying higher premium if the insurance company did not fare well in a particular year. Here, both the premium and benefit amount is safeguarded from any fluctuations in the economy.
Cash value building time is more in Participating Policy.
Generally in participating policy cash value takes more time to build up than the non-participating policy.