Difference Between Linked and Non-Linked Insurance Plans

Life Insurance Policy Plans are purchased to ensure the security of your loved ones in the event of your untimely demise. Like any other commodity, you need to do your homework right before investing in an insurance plan. With so many options available you should be able to choose the right plan depending on your budget and needs.

The criteria to put the insurance policies in different baskets are whether they are linked or non-linked. Read on to understand the difference between the linked and non-linked policies, the options available and how to make the right choice. 

What are Non-Linked Insurance Plans?

Non-linked insurance plans are low-risk traditional plans that offer guaranteed returns. These returns are not related to market performance. They are not influenced by the fluctuations of the stock market. Non-linked insurance plans provide life cover. They ensure your family is financially protected by way of death or maturity benefits. The death benefit is a lump sum payout in the event of your untimely demise. The maturity benefit may be paid as a lump sum or regular payout depending on the insurance plan. It will not only provide financial security to your family but will also serve as a retirement corpus if you survive the term.

Some of the popular non-linked insurance plans are endowment plans, term insurance plans, money-back plans, etc. These plans provide low but well-defined guaranteed returns with add-ons and bonuses. The premium for these plans depends on the term, amount, and the type of plan chosen. You can use the life insurance calculator to assess the premium affordability and then make the investment decision.

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What is a Linked Insurance Plan?

Linked Insurance Plans are insurance-cum-investment plans. These life insurance policy plans are linked to the stock market. In these plans, the returns are not guaranteed as they depend on the market performance. The premiums for these plans are relatively high. A part of the premium will be utilised to provide life cover and the differential will be invested in market funds depending on your risk appetite and financial objectives.

The returns in linked plans are much higher when compared to the non-linked plans but they are equally risky due to market volatility. Do thorough market research and calculate the premiums using a life insurance calculatorr for an informed decision. The most popular linked insurance plan is the ULIP or Unit Linked Insurance Plan.

What is the Difference Between Linked and Non-Linked Insurance Plans?

There is a stark contrast between the linked and non-linked life insurance policy plans. Some of the specific differences are:

Flexibility In Investment: Under linked life insurance policy plans you are given the choice to invest in funds that align with your financial goals and risk tolerance. If you have a greater risk appetite you can invest in equity-based funds and earn higher returns. You do not have a similar option in non-linked insurance plans. The choice of investment lies with the insurer.

Maturity Benefit: If you choose to buy insurance-cum-investment plans like ULIP, the units you buy at the time of policy purchase will be returned to you at the corresponding market value on maturity. You also get loyalty rewards and annual bonuses on maturity. In the case of non-linked insurance plans the guaranteed returns and sum assured are as defined at the time of purchase of the plan.

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Can Switch Investment Options: In Unit Linked Insurance Plans, the option to switch investments in funds depends on preferences. Some insurance companies may levy charges for such conversions but most of them do not. If your risk appetite changes, you can shift from a high-risk portfolio to a low-risk portfolio without any charges.

Clarity: There is more transparency regarding the investments in linked insurance plans as opposed to the non-linked insurance plans. You can monitor your investment portfolio regularly. The insurance company sends regular updates about the premium invested and the market value. Since there is no investment component in non-linked plans, you will have no clarity about the investment part.

Withdrawal Option: In linked life insurance policy plans you are given the option to withdraw funds within a prescribed limit whenever you need cash. However, you do not have the same option in non-linked plans. You should either surrender the policy or avail a loan against the policy when you need funds.


The choice of buying linked or non-linked life insurance policy plans depends on what you are looking for. If you are a risk taker and are looking for a life cover along with high returns, the linked plans are for you. On the contrary, if you are a risk-averse personality then non-linked plans are best suited for you. Consider your financial goals and risk appetite, and make an informed decision for achieving your financial objectives.

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