Participating (Par) Insurance Products: How Bonuses Work
Why in the news
Volatile equity markets, falling interest rates and price competition are pushing Indian life insurers towards par products.
| Product | Feature |
|---|---|
| Par | Guaranteed benefits plus bonus share; balances security and growth |
| Non-par | Fixed guaranteed returns; insurer exposed when rates are low |
| ULIP | Policyholder bears full market risk |
Key facts
- Par policies are with-profit policies; surplus depends on investment returns, expenses and claims.
- Reversionary bonus: yearly, added to sum assured. Cash bonus: paid at once. Terminal bonus: on maturity or death.
- Premium is slightly above non-par as part funds the bonus pool.
Exam angle
- Par = with-profit; bonuses are not guaranteed.