LIC Bonus Rates 2021- 22 (as per 2021 March Valuation) – All details with charts and illustrations. Life Insurance Corporation of India (LIC of India) has declared the latest bonus rates for the valuation period 1st April 2020 to 31st March 2021. The point to remember is 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. And the loyalty additions declared now will reflect in the maturity benefit of policies maturing from 1st January 2022.
What is LIC Bonus Rate?
The profit of Life Insurance Corporation of India is shared with the policyholders in with-profit policies. The amount thus added to the policy account as the share of the profit is called a bonus. The amount of bonus added to the policy account will be based on the result of valuation for that particular plan and the rate thus declared by LIC based on the valuation is called bonus rate.
As the valuation of each plan is done separately the bonus rates also vary from plan to plan. Further, the bouns rates can vary within the plan based on the term of the plan and the Sum Assured of the plan purchased.
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.
Reversionary Bonus – Most common type of 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 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).
How the bonus is calculated in LIC?
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 bonus portion of the maturity returns. And if the bonus remains constant for the entire term, the total bonus accrued to the policy shall be 45,000 X 21 =9,45,000
This policy will be eligible for the Final Additional Bonus at the time of maturity. And if we assume that the policy matures in the current year, the eligible rate as per the latest valuation is declared as 100 per 1000 Sum Assured (21-year term and sum assured above 2,00,000) for endowment type of plans.
The calculation of maturity amount in LIC as per the above-mentioned details is shown in this illustration.
LIC Bonus Rates 2021 – 22 – Inforce Plans (as per March 2021 Valuation)
The latest bonus rates declared for all the with-profit in-force plans are provided here. The highlight of the current year is that LIC has maintained the same rates as per the bonus rates declared in the 2020 Valuation. In this pandemic era where naturally the number of claims may have raised, it is really commendable that LIC was able to maintain the same bonus rates as last year. And further to add it is even more praiseworthy as this rate was maintained amidst dwindling interest rates in domestic as well as international markets.
LIC Bonus Rates -2021-22 – Withdrawn Plans
The LIC’s Bonus rate chart for withdrawn plans (plans which are not available for sale now) as per 2021 march valuation is given below.
LIC of India was successful in maintaining the bonus rates declared in the last valuation for the current year also which is again a matter to rejoice for the policyholders.
Final addition bonus rates for the policies maturing in financial year 2021-22
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 as per the current valuation is 15 years. And the FAB rates increase with the sum assured of the policy also.
Final Addition Bonus – Endowment type of plans
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 Addition Bonus rates – LIC – Other plans
The final additional bonus rates of other plans are given in the chart provided below.
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.
LIC’s Jeevan Saral – Loyalty addition rates 2021-22 (2021 March Valuation)
Jeevan Saral (Plan 165) has been a very popular plan from the LIC of India. This Year LIC has declared the loyalty addition rates for the 19-year term also and the rate ranges from 670 to 930 as per the monthly premium band.
LIC Bonus Rates – Frequently Asked Questions
- LIC declares bonus in which month?
- Ans: 1st September is the founding Day of LIC and in connection with this LIC celebrates first week of september as Insurance Week and LIC usually declares bonus in the first week of September.
- What is reversionary bonus and terminal bonus?
- Reversionay bonus is the bonus declared and added to the policy account every year within the term of the policy on payment of premium. Terminal bonus is one time bonus added and paid at the time of exit form the policy by way of maturity or death.
- What is guaranteed bonus in LIC?
- Some LIC policies have guaranteed benefits where instead of declared bonus pree fixed guaranteed amount is added to the policy accout every year. This guaranteed benefit is called guaranteed additions and people may also call it as guaranteed bonus.
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.