Participating life insurance plans: Suitable for steady, long-term goals

Be mindful of limited returns, low liquidity, and higher premiums than non-par plans

Life insurers are increasingly shifting towards participating (par) products to reduce balance-sheet risk, partly due to intense price competition in the non-par segment. As these products gain prominence, investors must carefully assess whether they align with their financial goals. 

Decoding par plans

 

Non-par products offer guaranteed benefits and predictable returns. They are lower-cost options with no bonuses. At the other end are unit-linked insurance plans (Ulips), which are entirely market-linked (investing in equity, debt, or hybrid funds) and provide non-guaranteed returns. “The full investment risk is borne by the policyholder,” says Nitin Mehta, chief distribution officer – partnership distribution and