LIC Bonus Rates 2018 – 2019 | All Details With Charts and Illustrations. Life Insurance Corporation of India (LIC) has declared bonus rates for the valuation period from 1st April 2017 to 31st March 2018. Incidentally, LIC shares its valuation surplus or profit to the policyholders in the form of Bonus and Loyalty Additions. The declared bonus amount may get added to the ‘policy account’ of with-profits policies and shall be available to the policyholder as and when he or she exits from the policy as a result of maturity or death claim.
What are the different types of bonuses declared by LIC?
LIC declares different types of bonuses for policies depending on the benefit pattern of the plans and they bear different names. The most common types of bonuses are…
Simple Reversionary Bonus
This is a type of bonus declared every year and shall be added to the ‘policy account’ and shall be available (in full) to the policyholder only when he exits from the policy in the form of maturity or death. If he decides to exit from the policy in between (by surrendering the policy) he may get only a portion of the total accrued bonus, depending on the surrender value available at that time.
Final Additional Bonus (FAB)
Final Additional Bonus (FAB) is a one-time additional bonus, which is paid along with the maturity of participating policies. This is paid in addition to the simple reversionary bonus declared to the policy. Please note that Final Additional Bonus (FAB) is paid only once in the policies, resulting into a claim, by maturity or discounted claim (Surrender of policies with one year preceding the date of maturity) or death claim.
Loyalty Additions (LA)
Loyalty additions are paid as a one time benefit in some policies in lieu of simple reversionary bonus (SRB). The main difference is that, unlike the simple reversionary bonus, which becomes a part of the policy benefits as and when it is declared, Loyalty additions shall be available to the policyholder only at the time of exit from the policy.
LIC Bonus Rate Charts – How to read?
Bonus rates and Loyalty Additions are declared as Simple Reversionary Bonuses in LIC. This means the bonus rates will not be compounded. Bonus rates thus declared shall be applicable for 1000 Rs. Sum Assured of the respective plan for the particular year.
For example, The bonus rate of New Endowment (Plan – 814) for the 21-year term is Rs. 48 per 1000 Sum Assured. Let us assume that the policy is for a Sum Assured of 10,00,000.
So the bonus for the particular year will be 10,00,000 X 48/1000 —> Rs. 48,000
The bonuses thus declared for all the years till the maturity of the policy will be added together at the time of maturity to find the simple reversionary portion of the maturity returns.
LIC Bonus Rates 2018-19 – New plans (as per March 2018 Valuation)
Latest bonus rates declared for all the in force, with profit plans, which are open for sale are given here. Bonus rates of previous two years also have been given to enable comparison.
You can see that Jeevan Pragati (Plan 838) is the only plan which has shown a negative variation in the declared bonus rates. On the other hand, New Jeevan Nidhi (Plan 812 and 818) showed an amazing increase in bonus rates. In the current scenario of dwindling interest rates, it is great to see such a high positive variation for this plan.
Another notable fact is that bonus rates for Jeevan Umang plan have been declared for the first time and the rates are higher than the expectations.
Click here to download PDF version of LIC Bonus rate comparison for last three years.
LIC Jeevan Umang (Plan 845) Bonus Rates
LIC has declared the bonus rates for newly launched plan Jeevan Umang ( Plan 845) for the first time in the current valuation. LIC Jeevan Umang (T-845) is a versatile, ‘with profit whole life plan’ which has several benefits of erstwhile popular plan Jeevan Tarang (T 178). The greatest advantage of LIC Jeevan Umang is that it offers a ‘Guaranteed Pension’ and ‘Insurance’ to the policyholder and that too without any tax liability on pension amount. LIC offers guaranteed annual survival benefits at the rate of 8% of Sum Assured after premium paying term which is followed by maturity benefit at 100 years of age.
LIC Bonus Rates 2017-18 – withdrawn plans
The bonus rate chart for withdrawn plans is given here. You may recall that all the insurance plans were withdrawn on 31/12/2013. Plans were restructured and relaunched later from 1/1/2014.
On closely examining the bonus rates of withdrawn plans, Jeevan Nidhi (Plan 169) will receive exceptionally higher bonus rates compared to the last year in this valuation.
Final Addition Bonus (FAB) Rates – 2018-19
As we have seen earlier, Final Addition Bonus (FAB) is a one time bonus paid along with final payment of the policy. Final Additional Bonus rates are dependant on certain factors which are often ignored at the time of purchasing an insurance policy. Minimum term required for the eligibility of Final Additional Bonus is 15 years.
|Final Addition Bonus Rates for 1000 Sum Assured|
|Term||up to 25000||25001 to 50000||50001 to 199999||200000 and above|
|40 & above||2150||2500||3000||3550|
If you go through the chart given above, you can see that the higher the term, the final additional bonus rates increase dramatically. FAB rates are dependent on Sum Assured of the policy also.
For example, the final additional bonus of a 30-year policy, with a minimum sum assured of 2,00,000 or above is Rs. 1100 per Rs.1000 Sum Assured. This is equivalent to 110% of Sum assured. To make it more clear, if the sum assured of the policy is 10,00,000 the final additional bonus will be 11,00,000.
The chart provided above (LIC Bonus Rates – FAB) is applicable to endowment type of Plans. LIC has divided other plans into various groups based on their nature and separate charts are provided for each group.
Loyalty Additions – What is it and when it is payable?
Certain plans like Jeevan Shree (151) and Jeevan Saral (165) have a specialized bonus structure. For such plans, no simple reversionary bonuses are declared. Instead, a one-time bonus with the name Loyalty Addition (LA) becomes payable for the policy at the time of maturity as per the valuation of the plan.
You can see that the loyalty additions for Jeevan Saral plan have been increased considerably in the current valuation. As the Loyalty Additions are provided as a one time benefit, this difference shall reflect considerably in policies maturing in the current year.
Read more: Click the link provided to open Premium and Benefits Calculator for LIC Jeevan Saral
A Brief Analysis of Bonus and Loyalty Addition rates declared in 2018 March valuation.
Of late, the financial market in India has been showing a continuous trend of reduction of interest rates. There were several instances of interest rate reductions in the past financial year itself. With this background, when we analyze the declared rates, we can see that previous year bonus rates are maintained in all the policies except one(Jeevan Pragati). Two policies showed an exceptional increase in rates also( Jeevan Nidhi and New Jeevan Nidhi). Another golden line is the high loyalty additions declared for Jeevan Saral ( Plan 165).
As LIC has launched umpteen number of plans in the past 62 years since its inception, it is difficult to cover the loyalty addition rates of each and every plans. I have tried to cover all the popular plans in this article and if you require more information you can check the complete bonus rates circular here.
If you require any more clarifications, you can use the comment section given below to ask your queries.
Anish L J is a ‘Financial Planner’ and member of Chartered Insurance Institute(CII), London and Insurance Institute of India. He is also a finance, insurance and software consultant. He thoroughly follows the developments in finance, insurance, and other related sectors.