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Types of Bonuses in LIC

Types of Bonuses in LIC

Several LIC policies come with different types of bonuses. These bonuses becomes payable only at the time of maturity or the death claim. Customers have a lot of confusion regarding the type of bonuses and how they are calculated. Lets explore these bonuses one by one.

1. Simple Reversionary Bonus (Bonus)

Generally "Bonus" means 'Simple Reversionary Bonus' which is declared per thousand of the sum assured every year. Once declared, this bonus becomes part of the guaranteed benefits of the plan. This bonus accrues every year but becomes payable only at maturity or death claim. 

If the policy holder surrenders the policy before completing the full policy term, he/she will not get the full bonus amount because this is calculated on the basis of full term.

Example Calculation:
If the Simple Reversionary Bonus rate for this year is Rs 52 per thousand sum assured and sum assured of the policy is Rs 1,00,000. 

Bonus = 52 x (100,000/1000)
Bonus = 5200/-

The bonus for this year will be Rs 5200/-. 

In same way, LIC declares Simple Reversionary Bonus each year and this is calculated per thousand sum assured and added to the guaranteed benefits of your plan.

2. Final Additional Bonus (FAB)

This bonus is paid as a token of appreciation on certain policies which run for long duration (certain years decided by LIC). This bonus is calculated only once, at the time of maturity or death claim.

The rate of FAB depends on 2 factors:
a.) The duration for which a policy has ran for, and
b.) The amount of Sum Assured.

Actual FAB chart for 2012 is given below:

Example Calculation:
Mr. ABC's Policy has ran for 21 years and matured in 2012
Sum Assured is Rs 200,000.
Therefore rate of FAB will be Rs 100 per thousand sum assured

FAB = 100 x (200000/1000)
FAB = Rs 20,000/-

3. Loyalty Additions (LA)

As the name suggests, this bonus is paid to customers for being loyal to LIC for long term. 
This bonus is also calculated on per thousand sum assured basis. Usually Loyalty Additions are calculated at the end of the term, but for some policies it is calculated every year after completing certain years.

Loyalty Additions is a non guaranteed type of bonus and totally depends on the LIC's performance. 

Example Calculation:
If the loyalty additions rate for 20 year term is Rs 35 per thousand sum assured and the sum assured is Rs 1,00,000.

LA = 35 x (100000/1000)
LA = Rs 3500/-

4. Guaranteed Additions (GA)

This bonus is declared at the time of offering a policy to customers. The Guaranteed bonus rate is pre-determined at the time of buying the policy but is payable at the time of maturity or the death claim. This bonus is also calculated on per thousand of the sum assured. Usually policies which give Guaranteed Additions do not give any other type of bonuses.

Example Calculation:
If the Guaranteed Addition rate is Rs 75/- per thousand sum assured and the sum assured is Rs 100,000.

GA = 75 x (1,00,000/1000)
GA = 7500/-

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