Definition
Non-Par Policy
A non-participating (non-par) policy offers fixed, guaranteed benefits and does not share in the insurer's surplus or pay bonuses.
Non-par savings plans, often marketed as guaranteed return plans, spell out the exact maturity and death benefits at the time of purchase, giving buyers certainty regardless of how the insurer's investments perform. The insurer bears the investment and longevity risk in exchange for not sharing surplus.
These products surged in India during low-interest-rate periods because they lock in a guaranteed return for long tenures. The headline 'guaranteed' figure is usually an absolute payout, not an annualised yield, so the effective internal rate of return is typically lower than it first appears and should be computed before buying.
Related terms
- Participating PolicyA participating (par) policy is a life insurance plan whose holders share in the insurer's surplus through bonuses declared periodically.
- Guaranteed Return PlanA guaranteed return plan is a non-par life insurance product that promises a fixed, pre-defined payout at maturity along with a life cover.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.