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Interesting information on Life Insurance Bonus

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When a life insurance company makes a surplus, Sharing of surplus money to policyholders is called a bonus. Not all life plans are eligible for a bonus. Plans can either be participatory, thereby qualifying for a bonus, or non-participatory, that do not qualify for a bonus. Guaranteed Addition (GA) is different from Bonus. Bonus depends on the insurer's surplus while GA is an assured addition to the policy and is disclosed upfront. Bonus depends on the quantum of investment gains of the 'with profit' fund either as a certain amount per`1,000 sums assured or as a percentage of the sum assured. In participatory life policies, bonus keeps getting added to the policy and accumulating till the maturity of the Life insurance plan. This is called 'reversionary' bonus. Terminal bonus is added on the maturity of policy or on death. It is a one-time bonus that the insurer declares for policyholders who keep policy till maturity. Simple Reversionary bonus (SRB) is calculated on the sum assured only. This bonus is declared annually and is accrued to be paid out at the time of a claim or maturity. Compound Reversionary bonus (CRB) is calculated as a percentage of the sum assured and all previously accrued bonuses. The bonus of each year is added to the sum assured and the next year’s bonus is calculated on the enhanced amount

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