Is it better to buy a life insurance policy that gives bonus? How will I know how much bonus is paid every year? Will the company give me an account statement? And if I get bonus how much will by sum assured increase
- Pankaj Lunawat
Insurance policies are available with or without bonus. The without-bonus policies (also known as non-participating plans) guarantee the entire money upfront. The policies with bonus (also known as participating policies) guarantee the sum assured upfront and additional bonuses may be declared by the company every year. The rate of bonus depends on profit generated from the applicable fund in which all participating policies' money is invested. The with-profit plans offer a potential of upside through bonuses. However, it's completely one's choice if one wants to opt for fully guaranteed benefits (with no upside or downside) or partially guaranteed benefits (with potential of upside).
Bonus declaration communication is statutory for all par products. All companies basis their bonus declaration schedule will intimate the eligible base by means of suitable communication. This statement typically includes the bonus declared in the policy for the last FY as well as bonus accrued inception till date in the policy; the bonus maybe redeemable at maturity/surrender basis the product construct. For cashback bonuses, the company will credit the customer's account and will intimate as such.
Except in case of cash bonus (which is paid out on policy anniversary), the bonuses gets attached to the policy. This means that the life cover increases by the extent of the amount of bonus.
The writer is MD & CEO, Edelweiss Tokio Life
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