BONUS Rules
Content
* RULES FOR PAYMENT OF BONUS AND GUARANTEED ADDITION*
The Corporation carries out an actuarial valuation of its liabilities on all policies annually i.e. 31st March of every year. The assets of the corporation are also valued. The excess of the value of assets over the amount of total policy liabilities is called valuation surplus. After giving 5% share to Govt. of India, 95% of total surplus is distributed among policyholders who have “with profit” or “ participating policies”. Following are General Guidelines for payment of simple Reversionary Bonus, interim Bonus, Final (additional) Bonus.
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SIMPLE
REVERSIONARY
BONUS -
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Bonus is payable on Basic Sum Assured in respect of participating or with profit policies. These Bonus rates are applicable for policy year entered upon during the Inter valuation period i.e. from 1st April….. to 31st March….. and in force for full sum assured as on 31st March…. Policies issued by corporation or previous insurer prescribing a fixed addition to sum assured like under GTB policy, Guaranteed addition or Loyalty addition or by any other name are not governed by the Bonus declared as per valuation results. With effect from the policy anniversary falling on or after 1-4-1985, bonus is to be paid at rate equal to LIC policies even under unit policies falling under Group 0 to 9. For example, if a unit policy falls under Group 8, upto 31-3-1985, Bonus was paid @ 80% of LIC rate. From 1-4-1985 & onwards it will be at par with LIC policies. In order that a policy should become eligible for Bonus, it is necessary that the policy should be in force for the full sum assured as on the Date of valuation. If a policy is in full force on the date of valuation & on the books of the corporation as on date of valuation, but subsequently made paid up without payment of all premiums falling due in the policy year on date of valuation, bonus for the policy year will be proportionally reduced. Bonus declared on the policies, issued on or after 1-4-1973, the bonus shall vest only if the policy has been in full force for the full Sum assured for 5 years from its date of commencement. It is clarified that not only full 5 years premium should be paid but a period of 5 years should also elapsed from date of commencement of policy (CO/PHS/86/23 dt. 5-3-80) As per co circular CO/PHS/528 dt. 16-7-86, in Discounted value of Maturity Claim of Policy having 5 years term if desired before completion of 5 years by policy, then Bonus for 5 years will be allowed. However w.e.f. 3/97 valuation( CO/ACT/VAL/1622/4 dt. 25-11-97) a policy issued with 5 years term, if discounted in the last policy year, then Bonus for full 5 years will not be allowed.( this condition will have no value, after introduction of 3 years rule for vesting of bonus)
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W.e.f. 31-3-2002’s valuation,ref: CO/ACT/VAL/1826/4 dt. 9-9-2002 & further clarification from c.o. ref: Act/val/v-97-2 dt. 27-1-2003. Bonus declared on the policies will vest provided they have in force for a period of 3 years from the date of commencement & are on the books of corporation either for full sum assured or for paid up value as on date of circular i.e. 9-9-2002. In short, under a policy where premiums have been paid for 3 years and date of death is up to 8/9/2002, bonus for such 3 years will not vest even if death claim payment have effected on and after 9/9/2002 and onwards. In case of death claim in respect of policies issued on or after 1-4-73, full amount of Bonus will be paid if policy is in full force on the date of death even during the period of 5 years from the date of Risk. From, 9/9/2002, the period is further reduced to 3 years.
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In respect of death claim, the bonus is payable for the number of years for which premiums have been Paid/ Recovered. Under New Jan Raksha policy (plan 91) after paying at least 2 full year premiums, death cover is extended for 3 years. If death occurs during this 3 years, full sum assured is payable, but bonus will be paid for actual No. of years premium paid. No premiums are also recovered for this 3 years period i.e. unpaid premiums from claim amount. In case of policy converted from “ without profit” plan to “ with profit plan “ it will become eligible for bonus, only from the first policy anniversary falling in the valuation period on the date of alteration. For such alterations effected upto 31-12-98, the qualifying period for vesting of bonus i.e. 3 or 5 years will be reckoned from the date of commencement. No. of years bonus payable will be reckoned from the date from which policy participate in profit. For deciding rate of Bonus, Term of policy will be reckoned from date of conversion. However, for alterations, which are effected from 1-1-99 & on words, the qualifying period of 3 years for vesting of Bonus, the term for determining the Bonus, rate and the number of years Bonus payable, will be reckoned from the date of conversion. Under Plan No. 27 – Convertible whole life policies, policies which are converted regarding cases of conversion of policies from without profit to with profit on or Before 31-12-98, the qualifying period of 3 or 5 years for vesting of Bonus will be reckoned from date of commencement, entire term of policy from Date of commencement of policy will be taken into account to determine the Bonus rate. But No of years bonus payable will be reckoned from date of conversion. (Ref : CO/Act/ PS dt. 20/12/2002) For conversions from 1-1-99 & onword, the qualifying period of 3 or 5 yrs. For payment of Bonus, term of policy to decide Bonus rate, No. of years Bonus payable will be reckoned from date of conversion.
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In respect of policies under Jeevan Kishor (plan – 102) & Jeevan Sukanya (plan – 109), Bonus will not vest during the waiting period i.e. period from date of commencement of policy to date of commencement of risk. The reversionary Bonus for waiting period from date of commencement will vest on policy anniversary from which the risk is covered or at the end of 3 or 5 years from commencement whichever is later, provided policy is in force at that time. It has been also clarified that eventhough premium due as on the date of commencement of risk (i.e. policy anniversary) is not paid, then also bonus is payable for waiting period. For example – Date of commencement 1-1-90 mode Qly. Date of commencement of Risk 1-1-95 FUP Qly 1 – 95. Date of surrender 2-1-95. In this case, Bonus for 5 years from 1-1-90 to 1-1-95 i.e. Waiting period is allowed, eventhough premiums From 1-95 is not paid. Date of claim/surrender should be on or after date of commencement of risk. (CO/Act/PS dt. 20/12/2002) CDA Policies (Table No. 41, 50, 80 & 81) will participate in profits from the deferred date i.e. either on attaining 18 or 21 yrs. As per plan specifies. Under plan 41 & 80, policies will participate in profits after L.A. has attained 21 yrs. & under plan 50 & 81, policies will participate in profits after L.A. has attained 18 yrs. Here deferred date means the date on which risk will commence i.e. 18 yrs. Or 21 yrs. Up to 3/1997’s valuation, for determining the Bonus rate, policy Term from date of commencement of policy will be taken into account, but Bonus is payable from date of vesting. However,w.e.f. 3/98’svaluation, policies vested on or before 31/12/1998, the bonus rate will be determined with reference to the policy term counted from the date of commencement of the policy. For policies vesting on & after 1-1-99,The Bonus rate to be applied will be determined with reference to the policy Term counted from Date of vesting & NOT from the date of commencement.
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Under New CDA plan No. 92, policy will participate in profit from the date of commencement of risk. Under this plan, risk will commence from policy anniversary on which the child attains age 12 yrs( NBD). For finding out, date of commencement of risk, add 12 in Date of birth, then on or after following policy anniversary. For finding out, date of vesting, add 18 to Date of Birth. From this date (not next policy anniversary) policy will vest. Upto 31/3/1997’s valuation,for deciding the bonus rate, term from date of commencement should be counted. Bonus is payable for the years from date of commencement of risk to date of maturity or death claim which ever is earlier. W.E.F. 31/3/1998’s valuation effective from 1/1/1999,For policies which have vested upto 31/12/1998, bonus rate will be determined with reference to the policy term counted from the date of commencement of policy. For policies vested on and after 1/1/1999 & onwards, for deciding the bonus rate, term on or after from next policy anniversary following date of vesting to date of maturity should be counted.(not original policy term). However, bonus is payable from date of commencement of risk to date of maturity. W.E.F. 31/3/2007’s valuation effective from 1/1/2008, the bonus rate will be determined with reference to the policy term counted from the date of commencement of risk. Under Jeevan Balya Plan No. 101, policy will participate in profit from the vesting Date. Policy will vest in L.A. when he attains 21 yrs Of his age. Up to 31/3/1997’s valuation, for deciding the bonus rate, term from date of commencement should be counted. Bonus is payable for the years from date vesting to date of maturity or death claim which ever is earlier. W.E.F. 31/3/1998’s valuation effective from 1/1/1999,For policies which have vested upto 31/12/1998, bonus rate will be determined with reference to the policy term counted from the date of commencement of policy. For policies vested on and after 1/1/1999 & onwards, for deciding the bonus rate, term on or after from next policy anniversary following date of vesting to date of maturity should be counted.(not original policy term). However, bonus is payable from date vesting to date of maturity. Under Jeevan sathi Plan No. 89, Bonus is payable on date of maturity or upon the death of second life whichever is later both under in force & paid up policy. Under Jeevan Sukanya Plan No. 109, Bonus is payable on date of maturity i.e. on completing 50 yrs. By L.A. or her death which ever is earlier. But on death of her husband, Bonus is not payable. Under Plan 90 & 103, Bonus is payable on date of maturity under Inforce policy claim. However under death claim of paid up policy, Bonus is payable along with paid up value immediately after death claim. Under Whole Life Policies or limited payment whole life policies, the policy year current on the date of death will also be taken into account for payment of Bonus. In respect of whole life policies, where claim is settled as maturity claim, Bonus is payable taking the term of the policy upto the end of the policy year current at the time of consideration of payment. Under CDA policies (41,50,80,81,92,101) for purpose of determining the qualifying period of 3 years for vesting of Bonus, the period from inception of policy should be taken & Not from date of vesting. This means, it is NOT necessary to pay the premiums for 3 years from date of vesting for deciding the qualifying period of 3 years for vesting of bonus.
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INTERIM BONUS The Bonus rates declared as on 31st March of every year will vest from/after 9 months from the date of valuation. During this pendency of declaration of the valuation result, Bonus is paid at rates of earlier valuation in respect of those policies becoming claim during this period. This bonus is called as Interim Bonus. The maximum No. Of years for which interim Bonus may be paid is 2 or 3 years. In respect of all participating policies becoming claims by death or maturity or discounted during the period commencing from 1st January and ending 9 months from the date of Next valuation in respect of each policy year entered upon after 31st March of Earlier year, provided the policies are in force for full sum assured as on date of claim/discount. In respect of policies, which are SURRENDERED during the intervaluation period i.e. after 1st April, & ending 9 months following the date of Next valuation, provided such policy is in force & on books of the corporation as on date of valuation. For example, policy-having date of commencement on 28-12-1989 & in force for full sum assured is surrendered on 1-4-97. It is entitled for interim bonus for the policy year commencing from 28-12-96 to 28-12-97 for valuation year 3/97; at the rate declared as per valuation as on 31-3-96 in proportion to the premium paid for the policy year from 28-12-96. If above policy is surrendered on 31-3-97, then policy is not entitled for interim Bonus. Because, policy is not on the books of corporation as on date of valuation i.e 31/3/1997. 5) 6) Interim Bonus is not calculated while calculating surrender value for Loan. While declaring Bonus Rate for the year 31-3-2004, separate Bonus Rate for interim Bonus was declared. For exampleThe Interim Bonus rates are applicable to policies in respect of each policy year entered upon after 31-3-2005 (i.e. From 1-4-2005) & result into claim by death/maturity/discount or surrendered during the period commencing from 1st January & ending 9 months from date of next valuation OR policies issued on & after 1-4-2005 & resulting into death claim during the period 1-1-2006 & 9 months ending date of next valuation (i.e.upto 31-12-2006), Bonus at interim Bonus rate is payable.
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In case of death claims under New plans, which were introduced after the yearof valuation, where No bonus rates were declared in said valuation. It has been clarified that for such policies, bonus declared as per Next valuation is payable. Refer co/act/val/v-03 dt. 8/3/2004.
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FINAL (ADDITIONAL) BONUS Final additional Bonus (FAB) is not payable when policy is discounted / surrendered upto 31/12/2005. As per valuation at 31-3-2005, which is effective w.e.f. 1-1-2006 If policyholder discounts the policy within 1 year preceding the date of maturity, the policy will be eligible for FAB. Under plan 112, Jeevan Shree Plan, if L.A. discounts the policy within 1 year preceding date of maturity, then Loyalty addition is also payable (CO/Act/2037 & 2046). FAB is not payable in case of paid up policies. FAB is payable, if policy is in full force for full S.A. till date of maturity / Death. No FAB is payable under Death claim of Money Back type of policies. However, w.e.f. 3/2006’s valuation effective from 1/1/2007(refer co/act/2095/4) FAB is now payable under Money back type policies i.e.24,25,26,73,74,75,76,93,106,107,108 . FAB is payable where date of death is on and after 1/1/2007 & onwards. These bonus rates are applicable for terms in respect of Maturity, Discounted maturity claim, no. of years premiums paid/recovered in respect of death claim. The concept of FAB was introduced with the valuation of 31-3-79. At that time, in case of maturity claim, if premiums have been paid for 15 years term or in death claim, as on date of death policy should have completed 15 years, then only FAB was payable. However, w.e.f. 31-3-83’s if number of years for which premiums are received / deducted / recovered are 15 yrs. Or more in case of maturity / Death claim & if policy is in full force as on date of claim, then FAB for No. of completed years of premiums paid is payable. The Rate of FAB depends upon the duration of said policy participated in profit. Therefore for calculation of FAB under a policy, the qualifying period & the duration of policy Term should be reckoned from the date of eligibility for simple Reversionary Bonus. In case of death claims under single premium / Fully paid up limited payment policies, the no. of years lapsed would mean the no. of policy years elapsed including of the policy year in which the death takes place, for payment of FAB. In case of progressive protection policies (plan No 79). Which are in full force, the FAB will be based on the sum assured in force on the date of death / date of maturity. In case of cash & cover, anticipated whole life policies the FAB is payable only if death takes place after the end of premium paying period. In case of CDA plans No 41,50,80 & 81 the term/duration at death will be reckoned from the deferred date i.e date of vesting. In case of New CDA plan 92, Term / duration at death will be reckoned from risk commencing date. In the case of multi – purpose policies in respect of death claims the FAB will be paid only at the end of the original term along with reversionary Bonus. The policies for which death claim is payable as per claim concession clause, FAB is payable taking the term of policy up to policy year for which premiums recovered. In case of maturity claims, if premiums have not been paid during the last policy year, but the policy was in force for full sum assured on the policy anniversary prior to the maturity date, the claim is paid for full sum assured on Maturity date with reversionary and interim bonus. In such case, FAB is also payable for full sum assured. However, where policy term & premium paying term are different and if any premium of given premium paying term remains unpaid, then above provision is NOT applicable.(co/act/ps dt/22/9/2005)
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ONE TIME BONUS –
To commemorate the Golden Jubilee Year of our Independence, the corporation has declared one time Bonus with valuation of 31-3-97. All policies issued with date of commencement upto 31-3-76 & which are in full force as on date of valuation 31-3-97, are entitled for Bonus. The effective date for payment of Bonus is 1-1-98. Hence for claim arisen between 1-4-97 to 31-12-97 are not eligible for this Bonus Rate are as follows per 1000 sum assured. Date of commencement of Sum Assured Group Policies Upto 25,000 25,000 to 50,000 on or before 31-3-71 5 20 After 1-4-71 to 31-3-76 2.5 10
50,001 & Above 40 20
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GUARANTEED ADDITION & LOYALTY ADDITION –
Guaranteed & Loyalty addition will accrue at the end of policy year for which premium have been paid, provided policy is in force. For vesting of Guaranteed addition, there is no precondition of payment of 3 or 5 years premium. Loyalty addition is payable after completing certain No. of years as shown in schedule elsewhere ( i.e. chronological data). Loyalty addition is not payable if policy is surrendered / Discounted or become paid-up. In case of death, provided prescribed rates of GA & LA, same will be calculated for every completed policy year for which premium have been paid. Hence, incase of death claim within 1 year of policy, even though premiums may have been paid for 1 year, Guaranteed addition is not payable. (THIS PROVISION HAS CHANGED SEE ITEM NO 8) In the year of death, even though we recover the premiums for remaining policy anniversary Guaranteed addition is not payable. In short, GA & LA is not payable for the policy year of death. (THIS PROVISION HAS CHANGED SEE ITEM NO 8) Under children money back policy No.113 & Komal Jeevan Plan 159, Guaranteed addition will not vest during waiting period i.e. period from date of commencement to date of commencement of Risk. As per letter dated 20/12/2002 Ref: ACT/PS, even though the premium due on the date of commencement of risk is not paid, but premiums during waiting period have been paid then, Guaranteed addition from date of commencement will be paid provided date of death / date of surrender is on or after date of commencement of risk. In short if FUP under the policy & moth / year of policy anniversary are same, then Guaranteed addition is payable. As per CO/ACT/2071/4 dtd. 3.5.2006, special provisions to Guaranteed additions have reviewed. At present, G.A. is not allowed for a policy year unless that policy year is completed. Now it has been decided (1) In case of death claim under a policy with G.A., the unpaid premiums, if any, for the policy year in which death of the Life Assured occurs, are recovered from death claim proceeds, Guaranteed addition will henceforth be payable for that policy year also. (2) In case of surrender & paid-up policies, the Guaranteed addition for the Last policy year will henceforth be added on proportionate Basis. e.g. if 2 months premiums have been received for the last policy year, then 1/6th of G.A. for the Last policy year shall be added. Here, last policy year means respective policy year in which premiums have been paid partly.
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As per further classification, for death intimations received after date of circular i.e 3/5/2006 where death is happened prior to this date, Revised rule of Guaranteed addition is applicable. As per, co/crm/ps/pol cond/rg dt.28/10/2006,the provisions of circular ref: co/act/2071 are also applicable to single premium policies. This means under single premium policies, the year in which death takes place or policy is surrendered, guaranteed addition for that year is payable fully. As per co/crm/ps dt.3/1/2007 , in case of fully paid up policy, if discounted in the last policy year, then full guaranteed addition for the last policy year shall be discounted upto the date on which the discounted claim is calculated and paid. As per valuation circular dt.19/9/2007 ref: co/act/val/2118, loyalty addition declared in respect of plans (112,137,151,154 to 157,158,159) will apply to all policies Maturing after remaining in force or discounted in the last year of policy or in case of death claim sub to the conditions applicable to each plan. Loyalty addition is payable for policies which are surrendered. For rates of loyalty addition and rules see rates of bonus page.
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SPECIAL ONE TIME REVERSIONARY BONUS
LIC has completed the 50th year i.e. golden Jubilee Year of its commencement. Keeping this occasion in view, LIC has declared ‘special one time reversionary bonus’ as per valuation of 31/3/2005 as per co/act/valu/2037/4 dt. 8/11/2005. This bonus is applicable for policies in force as on 31/3/2005 or subsequently revived provided they are otherwise eligible. This bonus is payable under such plans which are eligible for simple reversionary bonus under said valuation.
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This Bonus is payable under policies Maturing or becoming claim by death or surrendered on or after1/9/2005. the date of death or date of maturity should be on or after 1/9/2005. the date of death or date of maturity should be on and after 1/9/2005. The date of receipt of application of surrender value should be on and after 1/9/2005. Cases prior to this date are not eligible. 3) Rates of one-time simple reversionary Bonus rates depend on date of commencement of policy. 4) This bonus is NOT payable under without profit policies or policies with guaranteed addition or loyalty addition.. 5) Rules that are applicable to vesting of Bonus, eligibility of bonus, qualifying period of bonus are the same that were applicable to simple reversionary bonus.
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Example on Bonus Calculation
(1) Calcuate Interim & Vested Bonus under following with 3 different date of surrender : Policy No……… Risk date 15.5.1981 P&T 14-20 S.A. 5000 Mode – yearly FUP 5/2000 No. of yearly premiums paid 19 years ANS – Date of Surrender 31-12-99 Date of Surrender between 1-1-2000 to 31-3-2000 i.e. 1-2-2000. 3800 Paid up value = 3800 Vested Bonus @ 3/99 Valuation 5030 For 18 yrs. 1077 x 5 = 5385 Date of Surrender between 1-4-2000 to 31-12-2000 i.e. 1-4-2000 Paid up value = 3800 Vested Bonus @ 3/99 Valuation For 18 yrs. 1077 x 5 = 5385
Paid up value Vested Bonus @ 3/98 Valuation For 17 yrs. 1006 x 5 = Interim Bonus For 1 year @ 3/98’s Valuation 71 x 5 =
355 9185 Here Premiums have been paid for 19 yrs. But vested Bonus for 17 yrs. & interim Bonus For 1 year at 3/98’s Valuation is payable 3/99 valuation is applicable from 11-99. Bonus for 1 year is not payable . Because premium paid for 19th year is of valuation of 3/2000 & on date of valuation, policy is not books of corporation as on 313-2000 since surrendered on 31-12-99
Interim Bonus
= Nil 9185 Here vested Bonus for 18 yrs. As per 3/99’s Valuation is payable 3/99’s Valuation is applicable w.e.f. 1-12000.
Interim Bonus
But Bonus for 1 year is not payable since premiums paid for policyyear 5/99 to 5/2000 is for next valuation of 3/2000 & policy is not in the books as on 31-3-2000 since surrendered on 1-22000.
355 9540 Since policy is surrender 9 months following the date of valuation i.e. 3/2000 & policy is participating in profits as on 31-3-2000. Bonus for 1 year as interim Bonus at valuation of 3/99’ is paid . If policy with Qly. Mode & FUP 2/2000. Surrendered on 1-4-2000 than Interim Bonus is not payable reason – policy not participating in valuation of 3/2000.
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Example – 2Calculate
Bonus under following (surrender). Date of commencement 20-03-85, mode Hly., Fup – 9-90 SA 10,000, P & T 14-10, No. of yrs. Premium paid 51/2 yrs. Date of Surrender 10-01-92 Paid up value 5500 Vested Bonus as per Valuation chart of 3/90 Is Rs. 346 for 6yrs 33 for ½ year @ 3/90 valuation 313 x 10 = 3130 8630 As on date of surrender 3/90’s Valuation rates are known to us . Hence there is no Question of giving any interim Bonus. Proportirate Bonus for 6 month at 3/90’s valuation is given; since 3/90’s valuation is applicable.
Date of Surrender 1-10-90 Paid up value Vest Bonus for 5yrs. @ 3/89’s Valuation 280 x 10 = Interim Bonus for ½ yr. @ 3-89 Valuation 32 x 10 =
5500 2800
320 8620 Policy is surrendered 9 months from the date of valuation & is participating in 3/90’s valuation . Hence interim Bonus at 3/89’s valuation rate for 6 months is payable. 3/90’s valuation is applicable from 1-11991.
The Corporation carries out an actuarial valuation of its liabilities on all policies annually i.e. 31st March of every year. The assets of the corporation are also valued. The excess of the value of assets over the amount of total policy liabilities is called valuation surplus. After giving 5% share to Govt. of India, 95% of total surplus is distributed among policyholders who have “with profit” or “ participating policies”. Following are General Guidelines for payment of simple Reversionary Bonus, interim Bonus, Final (additional) Bonus.
A.
1)
SIMPLE
REVERSIONARY
BONUS -
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Bonus is payable on Basic Sum Assured in respect of participating or with profit policies. These Bonus rates are applicable for policy year entered upon during the Inter valuation period i.e. from 1st April….. to 31st March….. and in force for full sum assured as on 31st March…. Policies issued by corporation or previous insurer prescribing a fixed addition to sum assured like under GTB policy, Guaranteed addition or Loyalty addition or by any other name are not governed by the Bonus declared as per valuation results. With effect from the policy anniversary falling on or after 1-4-1985, bonus is to be paid at rate equal to LIC policies even under unit policies falling under Group 0 to 9. For example, if a unit policy falls under Group 8, upto 31-3-1985, Bonus was paid @ 80% of LIC rate. From 1-4-1985 & onwards it will be at par with LIC policies. In order that a policy should become eligible for Bonus, it is necessary that the policy should be in force for the full sum assured as on the Date of valuation. If a policy is in full force on the date of valuation & on the books of the corporation as on date of valuation, but subsequently made paid up without payment of all premiums falling due in the policy year on date of valuation, bonus for the policy year will be proportionally reduced. Bonus declared on the policies, issued on or after 1-4-1973, the bonus shall vest only if the policy has been in full force for the full Sum assured for 5 years from its date of commencement. It is clarified that not only full 5 years premium should be paid but a period of 5 years should also elapsed from date of commencement of policy (CO/PHS/86/23 dt. 5-3-80) As per co circular CO/PHS/528 dt. 16-7-86, in Discounted value of Maturity Claim of Policy having 5 years term if desired before completion of 5 years by policy, then Bonus for 5 years will be allowed. However w.e.f. 3/97 valuation( CO/ACT/VAL/1622/4 dt. 25-11-97) a policy issued with 5 years term, if discounted in the last policy year, then Bonus for full 5 years will not be allowed.( this condition will have no value, after introduction of 3 years rule for vesting of bonus)
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W.e.f. 31-3-2002’s valuation,ref: CO/ACT/VAL/1826/4 dt. 9-9-2002 & further clarification from c.o. ref: Act/val/v-97-2 dt. 27-1-2003. Bonus declared on the policies will vest provided they have in force for a period of 3 years from the date of commencement & are on the books of corporation either for full sum assured or for paid up value as on date of circular i.e. 9-9-2002. In short, under a policy where premiums have been paid for 3 years and date of death is up to 8/9/2002, bonus for such 3 years will not vest even if death claim payment have effected on and after 9/9/2002 and onwards. In case of death claim in respect of policies issued on or after 1-4-73, full amount of Bonus will be paid if policy is in full force on the date of death even during the period of 5 years from the date of Risk. From, 9/9/2002, the period is further reduced to 3 years.
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In respect of death claim, the bonus is payable for the number of years for which premiums have been Paid/ Recovered. Under New Jan Raksha policy (plan 91) after paying at least 2 full year premiums, death cover is extended for 3 years. If death occurs during this 3 years, full sum assured is payable, but bonus will be paid for actual No. of years premium paid. No premiums are also recovered for this 3 years period i.e. unpaid premiums from claim amount. In case of policy converted from “ without profit” plan to “ with profit plan “ it will become eligible for bonus, only from the first policy anniversary falling in the valuation period on the date of alteration. For such alterations effected upto 31-12-98, the qualifying period for vesting of bonus i.e. 3 or 5 years will be reckoned from the date of commencement. No. of years bonus payable will be reckoned from the date from which policy participate in profit. For deciding rate of Bonus, Term of policy will be reckoned from date of conversion. However, for alterations, which are effected from 1-1-99 & on words, the qualifying period of 3 years for vesting of Bonus, the term for determining the Bonus, rate and the number of years Bonus payable, will be reckoned from the date of conversion. Under Plan No. 27 – Convertible whole life policies, policies which are converted regarding cases of conversion of policies from without profit to with profit on or Before 31-12-98, the qualifying period of 3 or 5 years for vesting of Bonus will be reckoned from date of commencement, entire term of policy from Date of commencement of policy will be taken into account to determine the Bonus rate. But No of years bonus payable will be reckoned from date of conversion. (Ref : CO/Act/ PS dt. 20/12/2002) For conversions from 1-1-99 & onword, the qualifying period of 3 or 5 yrs. For payment of Bonus, term of policy to decide Bonus rate, No. of years Bonus payable will be reckoned from date of conversion.
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In respect of policies under Jeevan Kishor (plan – 102) & Jeevan Sukanya (plan – 109), Bonus will not vest during the waiting period i.e. period from date of commencement of policy to date of commencement of risk. The reversionary Bonus for waiting period from date of commencement will vest on policy anniversary from which the risk is covered or at the end of 3 or 5 years from commencement whichever is later, provided policy is in force at that time. It has been also clarified that eventhough premium due as on the date of commencement of risk (i.e. policy anniversary) is not paid, then also bonus is payable for waiting period. For example – Date of commencement 1-1-90 mode Qly. Date of commencement of Risk 1-1-95 FUP Qly 1 – 95. Date of surrender 2-1-95. In this case, Bonus for 5 years from 1-1-90 to 1-1-95 i.e. Waiting period is allowed, eventhough premiums From 1-95 is not paid. Date of claim/surrender should be on or after date of commencement of risk. (CO/Act/PS dt. 20/12/2002) CDA Policies (Table No. 41, 50, 80 & 81) will participate in profits from the deferred date i.e. either on attaining 18 or 21 yrs. As per plan specifies. Under plan 41 & 80, policies will participate in profits after L.A. has attained 21 yrs. & under plan 50 & 81, policies will participate in profits after L.A. has attained 18 yrs. Here deferred date means the date on which risk will commence i.e. 18 yrs. Or 21 yrs. Up to 3/1997’s valuation, for determining the Bonus rate, policy Term from date of commencement of policy will be taken into account, but Bonus is payable from date of vesting. However,w.e.f. 3/98’svaluation, policies vested on or before 31/12/1998, the bonus rate will be determined with reference to the policy term counted from the date of commencement of the policy. For policies vesting on & after 1-1-99,The Bonus rate to be applied will be determined with reference to the policy Term counted from Date of vesting & NOT from the date of commencement.
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16)
Under New CDA plan No. 92, policy will participate in profit from the date of commencement of risk. Under this plan, risk will commence from policy anniversary on which the child attains age 12 yrs( NBD). For finding out, date of commencement of risk, add 12 in Date of birth, then on or after following policy anniversary. For finding out, date of vesting, add 18 to Date of Birth. From this date (not next policy anniversary) policy will vest. Upto 31/3/1997’s valuation,for deciding the bonus rate, term from date of commencement should be counted. Bonus is payable for the years from date of commencement of risk to date of maturity or death claim which ever is earlier. W.E.F. 31/3/1998’s valuation effective from 1/1/1999,For policies which have vested upto 31/12/1998, bonus rate will be determined with reference to the policy term counted from the date of commencement of policy. For policies vested on and after 1/1/1999 & onwards, for deciding the bonus rate, term on or after from next policy anniversary following date of vesting to date of maturity should be counted.(not original policy term). However, bonus is payable from date of commencement of risk to date of maturity. W.E.F. 31/3/2007’s valuation effective from 1/1/2008, the bonus rate will be determined with reference to the policy term counted from the date of commencement of risk. Under Jeevan Balya Plan No. 101, policy will participate in profit from the vesting Date. Policy will vest in L.A. when he attains 21 yrs Of his age. Up to 31/3/1997’s valuation, for deciding the bonus rate, term from date of commencement should be counted. Bonus is payable for the years from date vesting to date of maturity or death claim which ever is earlier. W.E.F. 31/3/1998’s valuation effective from 1/1/1999,For policies which have vested upto 31/12/1998, bonus rate will be determined with reference to the policy term counted from the date of commencement of policy. For policies vested on and after 1/1/1999 & onwards, for deciding the bonus rate, term on or after from next policy anniversary following date of vesting to date of maturity should be counted.(not original policy term). However, bonus is payable from date vesting to date of maturity. Under Jeevan sathi Plan No. 89, Bonus is payable on date of maturity or upon the death of second life whichever is later both under in force & paid up policy. Under Jeevan Sukanya Plan No. 109, Bonus is payable on date of maturity i.e. on completing 50 yrs. By L.A. or her death which ever is earlier. But on death of her husband, Bonus is not payable. Under Plan 90 & 103, Bonus is payable on date of maturity under Inforce policy claim. However under death claim of paid up policy, Bonus is payable along with paid up value immediately after death claim. Under Whole Life Policies or limited payment whole life policies, the policy year current on the date of death will also be taken into account for payment of Bonus. In respect of whole life policies, where claim is settled as maturity claim, Bonus is payable taking the term of the policy upto the end of the policy year current at the time of consideration of payment. Under CDA policies (41,50,80,81,92,101) for purpose of determining the qualifying period of 3 years for vesting of Bonus, the period from inception of policy should be taken & Not from date of vesting. This means, it is NOT necessary to pay the premiums for 3 years from date of vesting for deciding the qualifying period of 3 years for vesting of bonus.
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B.
1)
INTERIM BONUS The Bonus rates declared as on 31st March of every year will vest from/after 9 months from the date of valuation. During this pendency of declaration of the valuation result, Bonus is paid at rates of earlier valuation in respect of those policies becoming claim during this period. This bonus is called as Interim Bonus. The maximum No. Of years for which interim Bonus may be paid is 2 or 3 years. In respect of all participating policies becoming claims by death or maturity or discounted during the period commencing from 1st January and ending 9 months from the date of Next valuation in respect of each policy year entered upon after 31st March of Earlier year, provided the policies are in force for full sum assured as on date of claim/discount. In respect of policies, which are SURRENDERED during the intervaluation period i.e. after 1st April, & ending 9 months following the date of Next valuation, provided such policy is in force & on books of the corporation as on date of valuation. For example, policy-having date of commencement on 28-12-1989 & in force for full sum assured is surrendered on 1-4-97. It is entitled for interim bonus for the policy year commencing from 28-12-96 to 28-12-97 for valuation year 3/97; at the rate declared as per valuation as on 31-3-96 in proportion to the premium paid for the policy year from 28-12-96. If above policy is surrendered on 31-3-97, then policy is not entitled for interim Bonus. Because, policy is not on the books of corporation as on date of valuation i.e 31/3/1997. 5) 6) Interim Bonus is not calculated while calculating surrender value for Loan. While declaring Bonus Rate for the year 31-3-2004, separate Bonus Rate for interim Bonus was declared. For exampleThe Interim Bonus rates are applicable to policies in respect of each policy year entered upon after 31-3-2005 (i.e. From 1-4-2005) & result into claim by death/maturity/discount or surrendered during the period commencing from 1st January & ending 9 months from date of next valuation OR policies issued on & after 1-4-2005 & resulting into death claim during the period 1-1-2006 & 9 months ending date of next valuation (i.e.upto 31-12-2006), Bonus at interim Bonus rate is payable.
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In case of death claims under New plans, which were introduced after the yearof valuation, where No bonus rates were declared in said valuation. It has been clarified that for such policies, bonus declared as per Next valuation is payable. Refer co/act/val/v-03 dt. 8/3/2004.
C.
1)
FINAL (ADDITIONAL) BONUS Final additional Bonus (FAB) is not payable when policy is discounted / surrendered upto 31/12/2005. As per valuation at 31-3-2005, which is effective w.e.f. 1-1-2006 If policyholder discounts the policy within 1 year preceding the date of maturity, the policy will be eligible for FAB. Under plan 112, Jeevan Shree Plan, if L.A. discounts the policy within 1 year preceding date of maturity, then Loyalty addition is also payable (CO/Act/2037 & 2046). FAB is not payable in case of paid up policies. FAB is payable, if policy is in full force for full S.A. till date of maturity / Death. No FAB is payable under Death claim of Money Back type of policies. However, w.e.f. 3/2006’s valuation effective from 1/1/2007(refer co/act/2095/4) FAB is now payable under Money back type policies i.e.24,25,26,73,74,75,76,93,106,107,108 . FAB is payable where date of death is on and after 1/1/2007 & onwards. These bonus rates are applicable for terms in respect of Maturity, Discounted maturity claim, no. of years premiums paid/recovered in respect of death claim. The concept of FAB was introduced with the valuation of 31-3-79. At that time, in case of maturity claim, if premiums have been paid for 15 years term or in death claim, as on date of death policy should have completed 15 years, then only FAB was payable. However, w.e.f. 31-3-83’s if number of years for which premiums are received / deducted / recovered are 15 yrs. Or more in case of maturity / Death claim & if policy is in full force as on date of claim, then FAB for No. of completed years of premiums paid is payable. The Rate of FAB depends upon the duration of said policy participated in profit. Therefore for calculation of FAB under a policy, the qualifying period & the duration of policy Term should be reckoned from the date of eligibility for simple Reversionary Bonus. In case of death claims under single premium / Fully paid up limited payment policies, the no. of years lapsed would mean the no. of policy years elapsed including of the policy year in which the death takes place, for payment of FAB. In case of progressive protection policies (plan No 79). Which are in full force, the FAB will be based on the sum assured in force on the date of death / date of maturity. In case of cash & cover, anticipated whole life policies the FAB is payable only if death takes place after the end of premium paying period. In case of CDA plans No 41,50,80 & 81 the term/duration at death will be reckoned from the deferred date i.e date of vesting. In case of New CDA plan 92, Term / duration at death will be reckoned from risk commencing date. In the case of multi – purpose policies in respect of death claims the FAB will be paid only at the end of the original term along with reversionary Bonus. The policies for which death claim is payable as per claim concession clause, FAB is payable taking the term of policy up to policy year for which premiums recovered. In case of maturity claims, if premiums have not been paid during the last policy year, but the policy was in force for full sum assured on the policy anniversary prior to the maturity date, the claim is paid for full sum assured on Maturity date with reversionary and interim bonus. In such case, FAB is also payable for full sum assured. However, where policy term & premium paying term are different and if any premium of given premium paying term remains unpaid, then above provision is NOT applicable.(co/act/ps dt/22/9/2005)
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D)
ONE TIME BONUS –
To commemorate the Golden Jubilee Year of our Independence, the corporation has declared one time Bonus with valuation of 31-3-97. All policies issued with date of commencement upto 31-3-76 & which are in full force as on date of valuation 31-3-97, are entitled for Bonus. The effective date for payment of Bonus is 1-1-98. Hence for claim arisen between 1-4-97 to 31-12-97 are not eligible for this Bonus Rate are as follows per 1000 sum assured. Date of commencement of Sum Assured Group Policies Upto 25,000 25,000 to 50,000 on or before 31-3-71 5 20 After 1-4-71 to 31-3-76 2.5 10
50,001 & Above 40 20
E)
1)
GUARANTEED ADDITION & LOYALTY ADDITION –
Guaranteed & Loyalty addition will accrue at the end of policy year for which premium have been paid, provided policy is in force. For vesting of Guaranteed addition, there is no precondition of payment of 3 or 5 years premium. Loyalty addition is payable after completing certain No. of years as shown in schedule elsewhere ( i.e. chronological data). Loyalty addition is not payable if policy is surrendered / Discounted or become paid-up. In case of death, provided prescribed rates of GA & LA, same will be calculated for every completed policy year for which premium have been paid. Hence, incase of death claim within 1 year of policy, even though premiums may have been paid for 1 year, Guaranteed addition is not payable. (THIS PROVISION HAS CHANGED SEE ITEM NO 8) In the year of death, even though we recover the premiums for remaining policy anniversary Guaranteed addition is not payable. In short, GA & LA is not payable for the policy year of death. (THIS PROVISION HAS CHANGED SEE ITEM NO 8) Under children money back policy No.113 & Komal Jeevan Plan 159, Guaranteed addition will not vest during waiting period i.e. period from date of commencement to date of commencement of Risk. As per letter dated 20/12/2002 Ref: ACT/PS, even though the premium due on the date of commencement of risk is not paid, but premiums during waiting period have been paid then, Guaranteed addition from date of commencement will be paid provided date of death / date of surrender is on or after date of commencement of risk. In short if FUP under the policy & moth / year of policy anniversary are same, then Guaranteed addition is payable. As per CO/ACT/2071/4 dtd. 3.5.2006, special provisions to Guaranteed additions have reviewed. At present, G.A. is not allowed for a policy year unless that policy year is completed. Now it has been decided (1) In case of death claim under a policy with G.A., the unpaid premiums, if any, for the policy year in which death of the Life Assured occurs, are recovered from death claim proceeds, Guaranteed addition will henceforth be payable for that policy year also. (2) In case of surrender & paid-up policies, the Guaranteed addition for the Last policy year will henceforth be added on proportionate Basis. e.g. if 2 months premiums have been received for the last policy year, then 1/6th of G.A. for the Last policy year shall be added. Here, last policy year means respective policy year in which premiums have been paid partly.
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As per further classification, for death intimations received after date of circular i.e 3/5/2006 where death is happened prior to this date, Revised rule of Guaranteed addition is applicable. As per, co/crm/ps/pol cond/rg dt.28/10/2006,the provisions of circular ref: co/act/2071 are also applicable to single premium policies. This means under single premium policies, the year in which death takes place or policy is surrendered, guaranteed addition for that year is payable fully. As per co/crm/ps dt.3/1/2007 , in case of fully paid up policy, if discounted in the last policy year, then full guaranteed addition for the last policy year shall be discounted upto the date on which the discounted claim is calculated and paid. As per valuation circular dt.19/9/2007 ref: co/act/val/2118, loyalty addition declared in respect of plans (112,137,151,154 to 157,158,159) will apply to all policies Maturing after remaining in force or discounted in the last year of policy or in case of death claim sub to the conditions applicable to each plan. Loyalty addition is payable for policies which are surrendered. For rates of loyalty addition and rules see rates of bonus page.
F)
SPECIAL ONE TIME REVERSIONARY BONUS
LIC has completed the 50th year i.e. golden Jubilee Year of its commencement. Keeping this occasion in view, LIC has declared ‘special one time reversionary bonus’ as per valuation of 31/3/2005 as per co/act/valu/2037/4 dt. 8/11/2005. This bonus is applicable for policies in force as on 31/3/2005 or subsequently revived provided they are otherwise eligible. This bonus is payable under such plans which are eligible for simple reversionary bonus under said valuation.
1)
This Bonus is payable under policies Maturing or becoming claim by death or surrendered on or after1/9/2005. the date of death or date of maturity should be on or after 1/9/2005. the date of death or date of maturity should be on and after 1/9/2005. The date of receipt of application of surrender value should be on and after 1/9/2005. Cases prior to this date are not eligible. 3) Rates of one-time simple reversionary Bonus rates depend on date of commencement of policy. 4) This bonus is NOT payable under without profit policies or policies with guaranteed addition or loyalty addition.. 5) Rules that are applicable to vesting of Bonus, eligibility of bonus, qualifying period of bonus are the same that were applicable to simple reversionary bonus.
2)
Example on Bonus Calculation
(1) Calcuate Interim & Vested Bonus under following with 3 different date of surrender : Policy No……… Risk date 15.5.1981 P&T 14-20 S.A. 5000 Mode – yearly FUP 5/2000 No. of yearly premiums paid 19 years ANS – Date of Surrender 31-12-99 Date of Surrender between 1-1-2000 to 31-3-2000 i.e. 1-2-2000. 3800 Paid up value = 3800 Vested Bonus @ 3/99 Valuation 5030 For 18 yrs. 1077 x 5 = 5385 Date of Surrender between 1-4-2000 to 31-12-2000 i.e. 1-4-2000 Paid up value = 3800 Vested Bonus @ 3/99 Valuation For 18 yrs. 1077 x 5 = 5385
Paid up value Vested Bonus @ 3/98 Valuation For 17 yrs. 1006 x 5 = Interim Bonus For 1 year @ 3/98’s Valuation 71 x 5 =
355 9185 Here Premiums have been paid for 19 yrs. But vested Bonus for 17 yrs. & interim Bonus For 1 year at 3/98’s Valuation is payable 3/99 valuation is applicable from 11-99. Bonus for 1 year is not payable . Because premium paid for 19th year is of valuation of 3/2000 & on date of valuation, policy is not books of corporation as on 313-2000 since surrendered on 31-12-99
Interim Bonus
= Nil 9185 Here vested Bonus for 18 yrs. As per 3/99’s Valuation is payable 3/99’s Valuation is applicable w.e.f. 1-12000.
Interim Bonus
But Bonus for 1 year is not payable since premiums paid for policyyear 5/99 to 5/2000 is for next valuation of 3/2000 & policy is not in the books as on 31-3-2000 since surrendered on 1-22000.
355 9540 Since policy is surrender 9 months following the date of valuation i.e. 3/2000 & policy is participating in profits as on 31-3-2000. Bonus for 1 year as interim Bonus at valuation of 3/99’ is paid . If policy with Qly. Mode & FUP 2/2000. Surrendered on 1-4-2000 than Interim Bonus is not payable reason – policy not participating in valuation of 3/2000.
=
Example – 2Calculate
Bonus under following (surrender). Date of commencement 20-03-85, mode Hly., Fup – 9-90 SA 10,000, P & T 14-10, No. of yrs. Premium paid 51/2 yrs. Date of Surrender 10-01-92 Paid up value 5500 Vested Bonus as per Valuation chart of 3/90 Is Rs. 346 for 6yrs 33 for ½ year @ 3/90 valuation 313 x 10 = 3130 8630 As on date of surrender 3/90’s Valuation rates are known to us . Hence there is no Question of giving any interim Bonus. Proportirate Bonus for 6 month at 3/90’s valuation is given; since 3/90’s valuation is applicable.
Date of Surrender 1-10-90 Paid up value Vest Bonus for 5yrs. @ 3/89’s Valuation 280 x 10 = Interim Bonus for ½ yr. @ 3-89 Valuation 32 x 10 =
5500 2800
320 8620 Policy is surrendered 9 months from the date of valuation & is participating in 3/90’s valuation . Hence interim Bonus at 3/89’s valuation rate for 6 months is payable. 3/90’s valuation is applicable from 1-11991.
