LIC Bonus Rates 2019 – 2020 (as per 2019 March valuation) – All details with charts and illustrations. LIC of India has declared the latest bonus rates for the valuation period from 1st April 2018 to 31st March 2019. You may be knowing that LIC shares its valuation surplus or profit to the policyholders in the form of Bonus and Loyalty Additions.
The declared bonus amount gets added to the policy account in with-profits policies and will become payable at the time of exit from the policy by way of death or maturity. On the other hand, loyalty additions are one-time payment which becomes payable at the time of exit by way of death or maturity.
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 explained below
Simple Reversionary Bonus
This is the type of bonus that is 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.
This type of bonus does not compound every year and hence it is called a simple reversionary bonus.
Final Additional Bonus (FAB)
Final Additional Bonus (FAB) is a one-time additional bonus, which is paid along with the maturity amount of participating (with profit) policies. FAB is paid in addition to the simple reversionary bonus declared and added to the policy account. Please note that Final Additional Bonus (FAB) is paid only once in the policies, resulting in 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. In other words, declared loyalty additions become applicable only to the policies getting exit, by way of death, surrender or maturity, in the declared year (subject to the conditions of the plan).
LIC Bonuses – How to calculate?
Bonus rates 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 Rs. 1000 Sum Assured of the respective plan for that 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 Rs. 10,00,000.
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 bonus portion of the maturity returns.
LIC Bonus Rates 2019-20 – New plans (as per March 2019 Valuation)
The latest bonus rates declared for all the in force, with profit plans, which are open for sale are given here. Bonus rates of the previous two years also have been given to enable comparison.
From the above
LIC Bonus Rates 2019-20 – withdrawn plans
The bonus rate chart for withdrawn plans or the plans which are no more available for sale is given below. You may recall that all the insurance plans were withdrawn on 31/12/2013 as per IRDA directive. Plans were restructured and relaunched later from 1/1/2014.
We can see that the bonus rates of Jeevan Nidhi plan which was increased in 2018 valuation have been maintained at the increased level in the new valuation.
Final Addition Bonus (FAB) Rates – 2019-20
As we have seen earlier, Final Addition Bonus (FAB) is a one-time additional bonus paid along with the final payment of the policy. Final Additional Bonus rates are dependant on certain factors that are often ignored at the time of purchasing an insurance policy. The minimum term required for the eligibility of Final Additional Bonus is 15 years.
From the above chart, we can see that the final addition bonus rates for 2019 valuation remain the same as the previous valuation. This Final (Additional) Bonuses are applicable In the case of Plans of Groups 1, 2, 8, 9 and 10 mentioned below.
- (Group 1) Whole Life type (Plans 2, 5, 6, 8, 10, 28 (Before Conversion), 35, 36, 37, 38, 49,77,78, 85 & 86)
- (Group 2) Endowment type (Plans 14, 17, 27 (After Conversion), 28 (After Conversion), 34, 39 40, 41, 42, 50, 54, 79, 80, 81, 84, 87, 90, 91, 92, 95, 101, 102, 103, 109, 110 & 121)
- (Group 8) Jeevan Mitra (Double Cover plan), Jeevan Saathi (Plans 88 & 89)
- (Group 9) Jeevan Mitra (Triple Cover Plan: Plan 133 )
- (Group 10) Limited Payment Endowment (Plan 48)
The final addition bonus rates of other popular plans for the 2019 valuation is given below.
Loyalty Addition Rates – 2019 valuation
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.
LIC Jeevan Saral (Plan 165) – loyalty addition rates
You can see that the loyalty additions for the 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.
Loyalty Addition rates of Jeevan Shree (112)
Jeevan Shree was one of the flagship products from LIC of India which was specifically designed to cater to the needs of high net worth individuals. With high guaranteed addition rates of Rs 75 per 1000 sum assured, the plan provides excellent returns. The loyalty additions declared for Jeevan Shree are amazing and it adds to the attractivity of the plan. Loyalty additions rates of a 25-year term are Rs 1300 per 1000 sum assured. This means 130% of the sum assured is paid as loyalty additions for plans maturing this year in addition to the sum assured and guaranteed additions.
Loyalty additions declared for popular money back plans, Children’s money-back, Jeevan Sanchay, and Jeevan Sneha are also provided in the above chart.
If you have any doubts or require any clarifications, please feel free to use the comment section provided below.
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.