The uncertainty of life is the foremost reason behind choosing to buy an online term plan these days. Of course, everyone wants to financially secure their families in the event of any untoward situation, leaving enough to help them cover living costs, debt repayments, and future goals like higher education and the like. Therefore, mentioning that you should not purchase term insurance as an investment is vital. At the same time, keeping your policy active is crucial for continued coverage.
You can utilize a term plan premium calculator to estimate the premium payable for your chosen coverage amount. This ensures that you can plan out your finances beforehand in order to avoid any lapses. Term insurance premiums are also eligible for tax deductions up to Rs. 1.5 lakh under Section 80C, which is another reason that should motivate you to invest. While buying term insurance, you should also have an idea about specific terminologies related to these policies, along with some pan types that may be suitable for beginners. Non-linked and non-participating term policies are thus the focal point of this article.
What is a non-linked term plan?
A non-linked term insurance policy is one that is not related or linked to the market performance of the insurer or company from which you are purchasing the same. To put it simply, the insurance policy and its benefits will not be impacted in any manner by the insurer’s overall market performance and business metrics. The policyholder’s nominees will receive the fixed sum assured or benefits based on the policy terms and conditions in case of the insured’s demise within the policy period. All term insurance plans are presently non-linked and have no relation to the fluctuations in the market. This is because they are not linked to the insurer’s business and are low-risk in nature.
What is a non-participating term plan?
All insurers provide non-participating term insurance plans, and they are also called non-par policies. These are policies where the policyholder does not take any part in the profit or market performance of the insurance company or entity. Simply put, the policyholders will not be getting any additional profits or bonuses from the insurance company except for the fixed sum assured. In addition, there are no maturity benefits provided to insured individuals in pure-term insurance policies in case they outlive the policy tenure.
As a result, there are no bonuses offered in such cases. A majority of conventional term plans can be called non-participating policies as a result. Even when the insurance company performs decently with regard to earning profits, if you have a pure-term insurance plan, you cannot expect any bonuses or accompanying benefits. You will similarly be unaffected if there are any losses made by the insurer.
Critical Aspects Of Non-Linked And Non-Participating Term Plans
Non-participating and non-linked term insurance policies are synonymous with most conventional plans out there in this segment. So here’s looking at their critical aspects in a nutshell:
- These policies do not have any relationship with the market performance or business performance of the insurer, along with profits/losses. These policies only offer the fixed sum assured in case of the untimely demise of the insured individual within the policy tenure, without any additional benefits, bonuses, or payouts.
- The sum assured or death benefit stays the same throughout the policy tenure, guaranteeing a return to the policyholder’s nominee in case of any premature demise within the policy period
- Since they are non-participating and non-linked policies, term insurance plans usually come with more affordable premiums for higher coverage
- These insurance products are low-risk in nature since there are no risks linked to market performance or the insurer’s profits/losses. The higher the link of the market to any policy, the greater the risk quotient for any investor. This is completely absent in this case for the investor, which is a good thing for those who are risk-averse by nature and desire pure life coverage above everything else.
Now that you have an idea about non-linked and non-participating policies, you should look to secure your family’s financial future at the earliest by purchasing a term plan. Do not neglect or put off your insurance purchase for later; you do not want a scenario where your family members have to go through a severe financial bind amidst a distressing situation in case of your unfortunate demise. Getting suitable term insurance coverage will ensure that your family members can cope with any such financial distress as a result of your absence. They can repay all liabilities that you may leave behind, cover the costs of higher education and other future goals, and also maintain their monthly living standards without any hassles. So, get your term insurance plan without further ado.