What are ‘with profit’ and ‘without profit’ insurance plans?

Policies that participate in the profits of the insurance company are called ‘with profit’ policies, while the policies on which the amount of bonus is fixed at the time of issue itself are called ‘without profit’ policies.

This means that irrespective of the profit earned by the insurers, the policy holders of without profit policies will get a fixed return on the amount invested by them.

Whereas, in case of with profit policies the amount of bonus payable is based on the net surplus earned by the insurers. Therefore, returns on these vary from year to year and can be more or less than the returns on without profit plans.