LIC Additional Bonus

LIFE INSURANCE POLICY: CHECK OUT WHAT MAGIC OF FINAL ADDITIONAL BONUS IS ALL ABOUT A life insurance policy is a long-term contract between the policyholder and the insurer for financial protection to the dependents if the policyholder dies during the tenure of the policy. Ideally, a policy should be for 25-30 years covering the earning span of a person’s life. It is argued by insurance customers that the sum assured fixed during the beginning of the term of the policy loses its economic value over a period of time and this financial protection may be inadequate when the need arises. This argument is valid as inflation erodes the purchasing power of a currency. It is a genuine apprehension that the sum assured under any policy may effectively look very small if claim arises after 20 to 25 years. The sum to be received on maturity may not adequately serve the purpose of supporting the policyholder during his post-retirement period. Insurers have come out with the ‘participating policy’, which is profit sharing from the returns on the investment of the life fund in the markets. The life fund comprises premium amount left with the insurer at the end of each year after meeting its expenses, claims outgo and statutory obligations. The investment returns are also added to the fund every year subject to actuarial, regulatory and statutory guidelines. Policyholders who opt for with-profit plans enjoy the benefit of allocation of bonus to their policy as simple reversionary bonus which is vested in the policy every year and which enhances the total sum payable to the policyholders or their families on maturity, surrender or death. In long-term policies, the bonus amount often exceeds the amount of premium paid. But there is a further reward known as Final Additional Bonus (FAB) payable only on death or maturity. Insurers pay this amount for policies with a term of 20 years or more. In India, LIC, as the only insurer with policies maturing after 20 years, has been announcing FAB. Readmore at http://starhealthdevarajan.com/news/575 For Insurance related services, U can always call Devarajan Ph 9840177017