Life Insurance Corporation of India (LIC of India) declares bonus and final addition bonus (FAB) rates every year. This is added in the LIC policy account of respective policy holder. Bonus rates are declared based on valuation of LIC’s business.
What is a Bonus?
Bonus is the amount added to the basic sum assured under a with-profit life insurance policy. Bonus are declared from surplus funds following the annual valuation of LIC’s assets and liabilities. Bonus is the amount added to the sum assured under a profit participating life insurance policy. It is announced by the life insurance companies on an yearly basis, based on their performance. The bonus rates vary according the type of policies and date on which these policies were procured by the policyholder.
Which policies are eligible for bonus?
Policies which are categorized as With Profit policy tend to get the bonus, while non-profit policies like term insurance or term insurance with return of premium plans won’t get the bonus.
How much Bonus will you get?
Bonus declared depends on:
1. Type of policy like Whole life, Money-back or Endowment plan.
2. Bonus rates are better for whole life plans, then endowment and then money back plan.
3. Profits made by insurance company.
4. LIC’s Investment experience and surpluses generated during the year.
5. Duration and Term Of Policy. More duration means better rate. E.g. Jeevan Anand policy with a term of 5 year will have a different bonus rate than Jeevan Anand of 15 years.
Also note bonus declared is always based on Sum assured and not on the premium.
Broadly the bonus rates declared (per Rs 1,000 sum assured) for the year for:
- Whole life policies range from Rs 95 to Rs 106.
- Endowment policies range from Rs 54 to Rs 89.
- Money-back and anticipated endowment range from Rs 53 to Rs 72.
The final additional bonus rates declared by the corporation range from Rs 25 to Rs 1,250 per thousand rupees sum assured.
How to check the Bonus paid?
LIC Bonus can be checked on LIC website. You can also check and compare last eight years bonus rates below:
When will the Bonus paid?
The bonus keeps accumulating from 1st year, in case of endowment policy, it will be given during maturity time. For money back policy, it will be given every 4 or 5 years and some part at the end of maturity period. Please note that when you surrender the policy, you will not get any bonus.
What are Types of LIC Bonus?
There are five types of bonuses paid by LIC:
1. Vested Bonus
All the LIC Plans with the suffix ‘With Profits’ are eligible for allocation of annual reversionary bonuses. When the bonuses are allocated they become vested with the policy and are payable on maturity or on death of the assured during the term of the policy. Where a policy is surrendered for cash value, the vested bonuses are added to the ‘paid-up value’ under the policy only after the policy has completed five years from the date of commencement.
2. Terminal Bonus
Terminal Bonuses are payable only in respect of death and maturity claims and not for surrenders and premature cancellations of policies. The terminal bonus rates and conditions for allotment vary every year depending upon LIC’s investment experience and bonus distribution policies.
3. Guaranteed Addition (GA)
In few plans bonuses is guaranteed where LIC obliged to pay a fixed amount of bonus till the agreed period. It is usually called as Guaranteed Addition.
4. Loyalty Addition (LA)
This is one time payment which will be given to policyholder or legal heirs, only after completion of certain period (either maturity or death). As the name suggests, this is given of being loyal to LIC.
5. Final Additional Bonus (FAB)
This is same as Loyalty Addition. Usually paid to policies whose term is more than 15 years. The calculation of this FAB is same as that of LA. Policies which have long term will usually have higher FAB.