With-Profit Policy (Par vs Non-Par)

What is a With-Profit Policy?

A with-profit (or "participating", "par") policy entitles the policyholder to share in the surplus of the insurer's participating fund through periodic bonuses over and above the guaranteed sum assured. A non-par (without-profit) policy pays only the guaranteed amount — no bonuses, no surprises, fully predictable.

Par vs Non-Par at a Glance

• Par: sum assured + accumulated bonuses; bonuses are non-guaranteed and depend on insurer's investment performance, mortality experience and expense control.
• Non-par: sum assured (or guaranteed annual payout in a non-par savings plan) only; returns fully locked at policy issuance, immune to interest-rate moves.

Bonus Types in a Par Policy

• Reversionary Bonus (RB) — declared annually, added to the policy and payable on maturity/death. Once declared, it becomes a guaranteed addition (cannot be reduced).
• Terminal Bonus (TB) — one-time, paid only on maturity, death or surrender in later policy years. Often the largest single component of total payout.
• Interim Bonus — pro-rata reversionary bonus for the period between last declaration and claim/maturity.
• Cash Bonus — paid annually in cash instead of accruing (rare in India).

Worked Example

20-year par endowment, sum assured Rs 10 lakh, annual premium Rs 50,000. Reversionary bonus declared at Rs 40 per Rs 1,000 SA = Rs 40,000/year. Over 20 years: Rs 8 lakh bonus + Rs 2 lakh terminal bonus + Rs 10 lakh SA = Rs 20 lakh maturity. IRR ~5.5%.

When to Choose Which

• Par: you accept variable returns for participation upside; long horizon (15+ years).
• Non-par savings: you want a fixed-rate guaranteed alternative to FDs with tax-free maturity (under Section 10(10D) limits).

IRDAI Caveat

Bonuses are not guaranteed. Past bonus rates are illustrative only. Read the "Customer Information Sheet" Section 7 for historical bonus declaration trends before purchase.

Educational only — not advice. ARN-314872.