Bonus Rates

LIC Bonus Rates 2020 – 2021 | All details with illustrations

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LIC Bonus Rates 2020 – 2021(as per 2020 March Valuation) – All details with charts and illustrations. LIC of India has declared the latest bonus rates for the valuation period 1 st April 2019 to 31st March 2020. You may be knowing that LIC shares its valuation surplus or profit to the policyholders in the form of Bonus and Loyalty Additions. Bonuses as per the rates declared will get added to the respective policy accounts as a valuation surplus for the current financial year. 

The sum total of all the declared bonus amount thus added to the policy account, in with-profits policies, 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.

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 Additional Bonus (FAB)

Loyalty additions are paid as a one time benefit in some policies in lieu of a 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 – 914) for the 21-year term is Rs. 45 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 45/1000 —> Rs. 45,000

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 2020 - 21 - New plans (as per March 2020 Valuation)

The latest bonus rates declared for all the with profit in force plans are provided here. The greatest difference from the previous year’s declarations is that LIC has declared separate rates for policies with a sum assured higher than one lakh. The introduction of slightly lower rates for small sum assured policies is understandable as the expense ratio to premium will be higher in lower sum assured policies.

LIC Bonus Charts Inforce Plans 2020 - 2021

Of late the financial markets are witnessing a trend of dwindling interest rates over time and naturally, the declared rates have also seen reflections of it. The bonus rates are slightly reduced compared to previous valuations.

LIC Bonus Rates - 2020-2021 -Withdrawn Plans

The LIC’s Bonus rate chart for withdrawn plans (plans which are not available for sale now) as per 2020 march valuation is given below.

The bonus rates of withdrawn plans also have been reduced sightly owing to the change in the market rates. If you want to know more about the bonus rates declared by LIC in previous years, please read this article.

Final addition bonus rates for the policies maturing in financial year 2020-21

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 the Final Additional Bonus is 15 years.

Final Additional Bonus - Endowment Plans

Final addition bonus rates for financial year 2020 -21

LIC has decided to maintain the FAB rates declared in the last financial year for the policies (exiting by death and maturity) in the current financial year also.

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)

Final Additional Bonus - Other plans

The final additional bonus rates of other plans are given in the chart provided below.

Final Additional Bonus rates for other plans 2020

Loyalty Addition Rates - 2020 - 21 (As per 2020 March 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.

Loyalty Addition Rates - Popular plans

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 1100 per 1000 sum assured. This means 110% of the sum assured is paid as loyalty additions for plans maturing this year in addition to the sum assured and guaranteed additions.

Loyalty Addition Rates for popular plans of LIC 2020 valuation

LIC's Jeevan Saral - Loyalty addition rates 2020 - 21(2020 March Valuation)

Jeevan Saral (Plan 165) has been a very popular plan from LIC of India. This Year LIC has declared the loyalty addition rates for the 19-year term also and the rate ranges from 610 to 830 as per the monthly premium band.

Anish L J

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.