LIC Bonus Rates for 2020-21. Know more about rates and Type of bonuses

Before you read regarding latest LIC bonus rate, first let’s understand types of policies that LIC offers. There are 2 basic types of insurance policies. Participating and non participating. As name suggests, a “participating” policy participate offers share in profit made by insurance company.  Profits are shared in the form of dividends or bonuses. These are paid out annually. Note, bonus given is not guaranteed and same for entire policy duration.

LIC’s main offerings or we can say core strengths are traditional participating policies like endowment policies. LIC enjoys 3/4th of market share in Indian insurance market and as such its important to know what’s bonus LIC is offering to help us in decision making.

Now let’s see type of bonus offered by LIC

1) Simple Reversionary Bonus

2) Final Additional Bonus (FAB) Or Terminal Bonus

3) Loyalty Additions

4) Guaranteed Additions (GA)

Simple Reversionary Bonus

As name suggests, this does not compound every year and hence the name. This bonus is offered every year till policy maturity.

Simple Reversionary Bonus is declared per thousand of the Sum Assured Amount in each financial year and added to your policy amount. This bonus is given at time of policy maturity or death of life assured.

Final Additional Bonus (FAB) Or Terminal Bonus

Final Additional Bonus (FAB) is a one-time concluding / additional bonus, which is paid along with the maturity amount. FAB is paid in addition to the simple reversionary bonus declared and added to the policy account. FAB is a one-time payment and paid only to those policyholders who have paid premiums for the complete tenure. This is not applicable to all participating policies.

Loyalty Additions

Loyalty Addition is kind of acknowledgement of long-term association of a loyal customer of LIC. Loyalty Addition is also declared per thousand of sum assured.

Loyalty Additions are subject to completion of the minimum policy period.

Guaranteed Additions

Some of LIC plan offer Guaranteed Additions which means that policyholder will get an assured amount of sum for a specific period. These bonuses are given at the time of maturity or claim.

How to calculate bonus?

Bonus rates thus declared shall be applicable for Rs. 1000 Sum Assured of the respective plan for that particular year. Bonus rates are declared as Simple Reversionary Bonuses which mean they are not compounded

For example, bonus rate of one of the plan is  ₹ 45 per 1000 Sum Assured. Let us assume that the policy is for a Sum Assured of  ₹ 20,00,000.

Bonus for the particular year will be 20,00,000 X 45/1000 —>  ₹ 90,000 for the year

Now let’s see, LIC Bonus Rates for 2020-21