Final answer:
A non-participating policy, also known as a non-par policy, is a type of insurance policy where the policyholder does not receive any dividends from the insurance company's profits. Non-par policies are typically simpler and less expensive compared to participating policies. Insurance companies offer non-par policies to provide policyholders with a clear and straightforward policy structure.
Step-by-step explanation:
Non-Participating Policy (Non-Par Policy)
A non-participating policy, also known as a non-par policy, is a type of insurance policy where the policyholder does not receive any dividends from the insurance company's profits. Unlike participating policies, which allow policyholders to receive dividends, non-participating policies do not offer any additional benefits beyond the guaranteed policy terms.
For example, in life insurance, a non-par policy will pay out a fixed death benefit upon the policyholder's death, but the policyholder will not share in any profits or surplus of the insurance company. Non-par policies are typically simpler and less expensive compared to participating policies.
Insurance companies offer non-par policies to provide policyholders with a clear and straightforward policy structure, without the complexities and potential variations associated with participating policies.