LIC bonuses are one of the most misunderstood aspects of traditional insurance plans. Many policyholders know they are earning bonuses but do not understand how to calculate what they will actually receive at maturity. Let me explain this clearly.
Types of bonuses LIC declares
LIC declares two main types of bonuses on participating policies:
- ▸
Simple Reversionary Bonus (SRB): Declared annually as a rate per Rs 1,000 Sum Assured. Once declared, it is added to the policy permanently and cannot be taken away. It is calculated on the Sum Assured, not on the accumulated bonus amount, so it does not compound.
- ▸
Final Additional Bonus (FAB): Declared at the time of claim (maturity or death) for policies that have been in force for a minimum number of years (usually 15 or more). This is a one-time bonus added when the policy ends.
How Simple Reversionary Bonus works
The current SRB rate for most LIC participating endowment plans is approximately Rs 45 to Rs 58 per Rs 1,000 Sum Assured per year, depending on the specific plan and the policy term.
Let us take an example. You have a policy with Sum Assured Rs 10 lakh and the current SRB rate is Rs 50 per Rs 1,000 Sum Assured per year. Annual bonus: Rs 50 x 1,000 (because 10 lakh = 1,000 units of Rs 1,000) = Rs 50,000 per year.
Over a 20-year policy, total accumulated SRB = Rs 50,000 x 20 = Rs 10 lakh.
So at maturity, you receive: Rs 10 lakh (Sum Assured) + Rs 10 lakh (SRB) + Final Additional Bonus (if applicable).
Final Additional Bonus
For long-running policies (15+ years), LIC adds a FAB ranging from Rs 500 to Rs 1,200 per Rs 1,000 Sum Assured, depending on the plan and the completed policy term. For a 20-year plan with FAB of Rs 700 per Rs 1,000: Rs 700 x 1,000 = Rs 7 lakh additional bonus.
So total maturity in our example: Rs 10 lakh + Rs 10 lakh + Rs 7 lakh = Rs 27 lakh. This is why LIC endowment plans with 20-year terms often return 2.5 to 3 times the Sum Assured.
How to check your current bonus balance
Log in to the LIC policyholder portal (licindia.in) and handle to your policy details. The accumulated bonus is displayed there. Alternatively, ask your LIC branch for a policy statement.
Important caveat
LIC's bonus rates are not fixed. They can change every year. The calculations above use current rates, and actual maturity amounts may be higher or lower depending on future bonus declarations. However, LIC has consistently declared bonuses every year since its inception, even during economic downturns.
Use our calculator at poddarwealth.com or call 9415313434 and I will run the exact numbers for your policy.
