Bonus Options

Bonus Options:

 

Bonus Options in Life Insurance, there are bonuses announce every year for the Traditional Participating Insurance Plans. In our previous article you have read about the bonuses, now we will brief the options of bonuses, which an insured person can utilize as per his/her requirements.

There are three options in Bonuses;

  1. Paid Up Additions – Paid Up Additions is the default option in Life Insurance Policy. In Paid Up Additions, bonuses get added every year to your Life Insurance Policy and behave as per the SRB (Simple Reversionary Bonus) or CRB (Compound Reversionary Bonus), on which your insurer calculates. In SRB, your bonuses added for the entire Policy Term and paid to you along with the Maturity or to Nominee along with the Claim Amount in SRB death benefit will be same as it was at the time of policy initiation, there is no increased death benefit due to bonuses. In CRB, your bonuses added to your policy same year and next year bonus will be calculated on the compounded amount and so on till the Policy Term, in CRB your Survival and Death benefit will be increased year by year, and the entire increased survival benefit will be paid at the maturity or increased death benefit to the Nominee.
  2. Cash – In Cash option you can withdraw bonus in form of cash from the Life Insurance Policy for your personal usage. In SRB and CRB your maturity and death benefits will be affected in proportion to Bonus withdrawals. To utilize the Cash option of Bonus, there could be some T&C by insurer like  you can withdraw upto 90% of accrued bonuses and/or you can withdraw only if you have more then Rs 5,000/- bonus in your Life Insurance Policy.
  3. Premium Offset – In Premium Offset, you can adjust your unpaid Premium with the accrued bonus every year. But it will minimize your survival benefit as well death benefits in comparison to Paid Up Additions option. After completion of Policy Payment Term your bonus mode will be set to default mode of “Paid Up Additions”, if you have not given any instructions to insurer. In case of financial crisis you can use this option to pay your premium and it will help to continue your Life Insurance Policy.

Basically in Endowment Life Insurance Plan out of all Traditional Participating Insurance Plans, we can utilize the options of bonuses to fulfill our financial requirements.

You can choose any one option out of the provided three options at the time of proposal stage of Life Insurance Plan or by default “Paid Up Addition” option will be chosen by insurer.

You can change the selected option in-between the Policy Payment Term or during the Policy Term as required. There is no extra cost to switch over the options of the bonuses.

Amit Saxena

Financial & Insurance Consultant
MaxLife Insurance Co Ltd & MaxBupa Health Insurance

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