First Read –How to Calculate Returns on LIC Policies (Part 1). Now take an illustration to calculate return of an LIC Policy.
Ramesh had LIC Policy for a Sum Assured = Rs 1,00,000 with Policy Term = 5 years (Date of Commencement – 28/08/1999). He was paying premium of Rs. 8,000 per annum. Due to some personal issued he missed his premium payment in 2005. First Unpaid Premium Due – 28/08/2005.
The bonus declared in the year 2004 is payable to the policies which are issued on or before the year 2003. Hence, to calculate the bonus vested under a policy as on 31/12/2004, the number of completed years as on 31/12/2004 should be calculated and then the bonus for the years has to be added.
The bonus vested as on 31/12/2004 is calculated as follows:
Total number of completed policy years as at 31/12/2004 is 5 (28/08/1999 to 28/08/2004). The policy will be eligible for bonus from the 2000 year valuation onwards.
LIC Bonus Rates (approx data for analysis purpose, check here for LIC Bonus Rates):
So the vested bonus calculated under the policy as at the end of each year will be as follows:
*This culmulative amount will be paid to the policyholder at the time of policy maturity or death.
So on maturity the total amount will be = Rs 100,000 + Rs 10,600 = Rs 110,600 /-
Manish has a LIC policy, Sum Assured = Rs 1,00,000 with Policy Term = 25 years. He is paying annual premium of Rs. 4,346 per annum. He wanted to check, how much he is going to get after 25 years.
Lets do the calculation:
Term Period = 25 years
Total premium payment = 4346 X 25 = Rs 108650/-
Bonus rate as 0.055. (approx data for analysis purpose, check here for LIC Bonus Rates)
The final Bonus amount will be = 0.055 X 1,00,000 X 25= Rs 137500/-
So on maturity the total amount will be = Rs 100000 + Rs 137500 = Rs 237500 /-
Same way you can also add Final Addition Benefit (FAB) with this amount (if any).