Unlike other insurance companies that offer only one or two bonuses to their customers, LIC offers 4 different types of bonuses. Many of the LIC plans come with more than one type of bonus; however, the bonus is paid to the policyholder only when the policy matures or if a death claim is made. Let us see what these 4 different bonuses that LIC offers are.
- Simple Reversionary Bonus
Simple Reversionary Bonus is also known as just ‘Bonus’. It is the amount that is declared for every thousand rupees of the Sum Assured for every year. This bonus then becomes a portion of the assured benefit of the policy. If the policy is surrendered before the completion of the entire policy term, then the insured person will not be paid the entire bonus amount as this bonus is calculated for the full term.
Sample calculation
Let us say that the Simple Reversionary Bonus for the current year is Rs. 50/ thousand rupees of the Sum Assured.
Sum assured is Rs 1,00,000.
Then Bonus for the current year is
50 x (100,000/1000)
Which will be, Rs. 5000
- Final Additional Bonus (FAB)
The FAB or Final Additional Bonus is given as a token of gratitude to the customer for selected policies that are for long durations. FAB is computed only once when the policy matures or when death claim is made. FAB is calculated based on the number of years that the policy has been running and the Sum Assured.
Sample calculation
Say, the time duration of the policy is 20 years
Sum Assured is Rs 100,000.
Say the FAB rate is Rs. 100/ thousand rupees of the Sum Assured.
Then the FAB bonus amount will be
100 x (100000/1000)
FAB = Rs 10,000
- Loyalty Additions (LA)
The Loyalty Additions bonus is given to customers as a gesture of appreciation as they have been loyal customers to LIC for a long time. LA is computed usually at the end of the policy term. However, there are some policies for which LA is computed every year after the completion of a specified number of years. This is not an assured bonus and it is dependent on how LIC has performed that year.
Sample calculation
For example, a policy has existed for 20 years.
The LA rate that is announced is say, Rs. 40/ thousand rupees of the Sum Assured.
Sum Assured is Rs 1,00,000.
Then the LA bonus amount will be
40 x (100000/1000)
LA = Rs 4000
- Guaranteed Additions (GA)
The guaranteed additions bonus is announced at the time of providing a policy to customers. Though this bonus is announced at the time of purchasing the policy, the bonus amount is paid only when the policy matures or when death claim is made. If guaranteed additions bonus is announced for a policy, then usually other bonuses are not offered.
Sample calculation
Say, the GA rate is Rs. 100/ thousand rupees of the Sum Assured
Sum Assured is Rs 100,000.
Then the GA bonus amount will be
100 x (1,00,000/1000)
GA = Rs. 10000