CEO answers consumer queries: Par plans vs ULIPs: Which life insurance product suits you better at age 37?

While ULIPs and participating (par) plans both offer life cover with savings or investment benefits, they cater to different risk profiles and goals. Bandhan Life CEO Satishwar B. explains how par plans work, how they differ from ULIPs, and what to check before buying.

I am a 37-year-old professional. I want to know about participating plans and how these are different from ULIPs? What are the things to check or keep in mind before buying par plans?

Advice by Satishwar B., MD and CEO, Bandhan Life

At 37, you are at a key life stage where planning for both protection and long-term savings becomes important. As financial responsibilities grow—be it family needs, home loans, or retirement goals—having life insurance is no longer optional – it is essential for every individual. And it’s heartening to see that you have realised this. 

Starting early not only lowers your premiums but also gives your money more time to grow. Among the many life insurance products available today, Participating (Par) Plans and ULIPs (Unit Linked Insurance Plans) are popular choices as they offer the dual benefit of wealth creation plus life insurance. They serve different purposes and suit different investor profiles.

What Are Participating Plans?

Participating plans, commonly known as ‘par plans’, are traditional life insurance products that offer two types of returns:

1.    Guaranteed benefits—these are fixed additions promised at the time of buying the plan and may be for a brief duration or for the full term of the policy.

2.    Variable bonuses—these come in the form of regular bonuses, which depend on the participating fund performance and are usually declared annually.

Bonuses could either be added to the policy’s value (reversionary bonuses) or paid out as cash. The better the participating fund performs, the higher the bonuses. Bonuses are not guaranteed and may vary from year to year.

These plans are well-suited for individuals seeking risk-free steady returns and life insurance cover for long-term life goals, such as saving for a child’s education, planning for retirement, or building a supplementary income stream.

How are Par Plans different from ULIPs?

ULIPs combine life insurance with market-linked investment, and investment risk is borne by the policyholder. A part of your premium goes toward providing life cover, while the rest is invested in funds of your choice—equity, debt, or balanced funds.

ULIP returns are market-driven. If the chosen funds do well, you stand to gain more. If you have some disposable income and an appetite to create wealth for your future, a ULIP is a great option. Within ULIPs, one of the great ways to build wealth and beat market volatility is to buy a ULIP with an equity-linked fund, e.g. a flexi-cap fund. This fund is designed to navigate volatile markets and aims to deliver strong returns over the long term.

The life cover also ensures that your beneficiaries remain financially secure in your absence.

Par plans, on the other hand, focus on stability. The guaranteed benefits provide a safety net, and the variable bonuses offer potential upside without exposing you to market volatility. This makes them ideal for those seeking disciplined savings with protection without actively managing market risks.

You can use Par plans to get supplementary income or for accumulating wealth for life goals such as downpayment for a new home, retirement for parents, and so on. With entry age as low as three months, our Par plans allow parents and guardians to start building a financial cushion for their children right from infancy, helping secure milestones like higher education.

In short, Par plans suit those who want stable, long-term savings with lower risk and downside protection, while ULIPs suit investors with a long investment horizon.

What to keep in mind

Here are some important points to consider before purchasing a par plan:

• Understand your goals and risk appetite: If you’re looking for safe, disciplined savings and life cover, Par plans are ideal. If you want aggressive wealth creation and can handle market ups and downs, a ULIP may suit you better.
• Assess your life cover needs: Ensure there is substantial life cover. Think about your family’s financial needs and your future responsibilities. You must ensure that the chosen plan provides adequate financial protection in your absence.
• Check the insurer’s bonus track record: Since part of your return depends on bonuses, it’s important to check how consistently the insurance company has declared bonuses in the past. A strong track record indicates prudent management and financial strength.
• Plan to stay invested long-term: Par plans are most effective when held for the long term—15 to 20 years or more. Staying invested allows you to accumulate bonuses and gradually build a meaningful corpus.
• Stability and Long-Term Growth: Par plans offer more stable and consistent returns. While they aren’t designed for quick or high-risk gains, their strength lies in capital preservation, steady growth over the long term with life cover protection, making them ideal for long-term financial security.

Final Thoughts

Life insurance is an essential part of a sound financial plan, providing not just protection but also the discipline to save regularly. Whether you choose a par plan for stability or a ULIP for higher returns, the key is to start early, align the product with your goals, and stay invested for the long term. You can check out our plans on www.bandhanlife.com.

At 37, this is the right time to lay the foundation for both protection and wealth creation, ensuring a more secure future for yourself and your loved ones. The longer you stay invested, the stronger your financial foundation becomes. So, if you haven’t secured your future with a life insurance plan yet, now is the time.