Bonus

Insurance

Quick Definition

Bonus is an additional amount paid by an insurance company to policyholders of participating policies, over and above the sum assured.

Detailed Explanation

In insurance, a Bonus is a share of the insurer’s profits distributed to policyholders, mainly in participating life insurance plans like endowment policies. It increases the overall payout received at maturity or death.

Bonuses are declared by the insurer based on performance and are governed under regulations of the :contentReference[oaicite:0]{index=0}.

Types of Bonus in Insurance

  • Reversionary Bonus: Declared annually and added to policy benefits
  • Terminal Bonus: Paid at maturity or claim settlement
  • Interim Bonus: Paid between bonus declaration periods

Key Points

  • Not guaranteed (depends on insurer’s profits)
  • Added to sum assured
  • Increases maturity and death benefits

Why Bonus Matters

  • Enhances overall returns from insurance policy
  • Rewards long-term policyholders
  • Helps in achieving better financial outcomes

What is Bonus in Insurance?

Bonus in insurance is an additional amount declared by the insurer based on profits, which is added to the policy benefits and increases the final payout at maturity or death.

Example

"If a policy has a sum assured of ₹5 lakh and accumulates ₹1 lakh as bonus, the total payout becomes ₹6 lakh."

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