What are the types of bonuses in life insurance?
- Answer
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Here is a brief look at each type of bonus in life insurance:
1. Reversionary Bonus, which is declared at the end of a financial year.
It comes in two forms:
- Simple Reversionary Bonus, which is calculated as a percentage of the Sum Assured;
- Compound Reversionary Bonus, which is calculated not only on the Sum Assured, but also on the bonuses previously added to the Sum Assured.
2. Interim Bonus, which is paid out to the policyholder (individual who purchases the policy) in case of a claim between two financial years (when bonuses are usually declared).
3. Terminal Bonus, which is added to the policy that is active until the maturity date. Think of it as a dessert that you get to enjoy after you complete the main course.
4. Cash Bonus, which is paid out at the end of the financial year rather than at the date of maturity.
