Insurance Glossary

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Insurance Term - Bonus

This is the amount given in addition to the sum assured by the concerned insurance company. Reversionary bonus is a bonus that is added to policies throughout the term of the policy. It may or may not be declared every year. When it is declared, it will not be given to the policyholder immediately. It will be payable as a guaranteed sum to the policyholder either at the end of the policy term, or if death occurs before the term, to the nominee. This bonus can either be a with-profit bonus or a guaranteed bonus. a) A with-profit bonus is linked to the profit of the company. If the company makes a profit, it declares a bonus in accordance with the profits of the organization. The profits are added to his/her insurance policy and given to the policyholder either on maturity of the policy or to the nominee, in case death occurs before that. This bonus will be flexible as it is dependent on the performance of the company. However, once it is declared, it becomes part of the sum assured. This is offered purely at the discretion of the insurer and depends on the profits made that year. b) In a with-profit bonus, there is a guaranteed bonus. This is part of the sum assured. It will be paid to the policyholder irrespective of the profits of the company.

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