Non Participating Policies are those which don’t participate in companies profit. Here customers don’t get any bonus. These are pure and cheapest form of policies which meant only for insurance and no other investment objective is attached in to it. These are usually Term Insurance.
The insurance contracts which gives bonus to the policy holders are called Participating Policies. The insurance company declares bonus from the surplus it has after allocating the investment earnings to various account heads. It means the policy is participating in companies profit. For this type of policies, the customer has to pay extra over the premium of life cover. Traditional endowment, money back policies comes under this type.