What is Vested Bonus in LIC Policies?
Endowment Plans with profits like Jeevan Anand (815), New Endowment Plan (814), Jeevan Labh (836), are eligible to get share of profit earned by insurance company in the form of bonuses. These bonuses keep accumulating during policy term and known as vested bonus. The vested bonuses are scheduled to be paid in case of maturity or death.
In case of LIC, these bonuses are of two types:
- Simple Reversionary Bonus
- Final Addition Bonus (Terminal Bonus)
Simple Reversionary Bonus
It is main form of bonus which is declared per thousand of sum assured for each financial year during policy term and keeps accumulating. This accumulated bonus can be seen policy holder's account as vested bonus.
To understand this bonus, bonus history of LIC new Endowment plan (814) which was launched in year 2014 is listed below.
|Year||Bonus per 1000 of Sum Assured|
|12-15 Years Term||16-20 Years Term||21-35 Years Term|
To understand vested bonus, let's take an example of New Endowment policy (814) with sum assured as 10,00,000, policy term as 21 and commencement year as 2014. As this policy progresses, year-wise bonus keeps adding, following table indicates bonus up to 2016.
|Policy Year||Bonus Rate (per 1000 of Sum Assured)||Bonus|
So, above policy has accumulated Rs. 1,44,000 in three years (2014-16) and it is known as vested bonus and it will keep accumulating bonus for each year during policy year.
Final Addition Bonus
Final Addition Bonus (FAB) or terminal bonus is second type of bonus which is given to policy holders by insurance company from its earned profit. It is onetime bonus associated with year of maturity or death provided that policy has completed 15 year at time of death or maturity.
In case of maturity or death claim under endowment plans, total vested bonus is sum of simple reversionary bonus + Final Addition Bonus.