When considering a life insurance plan, understanding how your policy can grow in value is essential. One way this happens is through a reversionary bonus. But what exactly is a reversionary bonus, and how does it work? If you’re unsure, you’re not alone. Many policyholders find this concept confusing. This guide will help clarify what a reversionary bonus is and how it benefits your life insurance plan.
Understanding the Reversionary Bonus
A reversionary bonus is an additional sum added to your life insurance policy by the insurer. This bonus is declared annually and becomes part of the policy’s guaranteed benefits. The reversionary bonus is not paid out immediately but is accumulated and paid along with the policy’s maturity or death benefits. Essentially, it enhances the value of your life insurance plan over time.
How Does a Reversionary Bonus Work?
The insurer declares a reversionary bonus after assessing the financial performance of its participating life insurance plans. If the insurer makes a surplus, part of it is distributed to policyholders as a reversionary bonus. The bonus amount depends on the sum assured and the performance of the insurer’s investments. Once declared, the bonus is added to your policy’s sum assured, increasing the overall benefit you or your beneficiaries will receive.
Types of Reversionary Bonuses
There are two main types of reversionary bonuses:
1. Simple Reversionary Bonus:
This is calculated as a percentage of the sum assured and added to the policy each year.
2. Compound Reversionary Bonus:
In this case, the bonus is calculated as a percentage of both the sum assured and the accumulated bonuses. This can significantly boost your policy’s value over time.
Benefits of a Reversionary Bonus
Including a reversionary bonus in your life insurance plan offers several benefits:
1. Enhanced Policy Value:
Over time, the reversionary bonus increases the sum assured, providing more significant benefits upon maturity or death.
2. Guaranteed Addition:
Once declared, the bonus is guaranteed and cannot be revoked by the insurer.
3. Compounded Growth:
If you have a compound reversionary bonus, your policy benefits from compounded growth, increasing its value more rapidly.
Why Should You Consider a Policy with a Reversionary Bonus?
Choosing a life insurance plan with a reversionary bonus can be a smart financial decision. It offers a way to increase your policy’s value without additional premiums. This bonus can provide peace of mind, knowing that your policy will grow over time, offering better returns and more security for your loved ones.
Conclusion
A reversionary bonus is a valuable feature in a life insurance plan, offering guaranteed growth over time. By understanding how it works, you can make more informed decisions about your insurance needs. Whether you choose a policy with a simple or compound reversionary bonus, the key is to ensure that it aligns with your long-term financial goals.
** Tax exemptions are as per applicable tax laws from time to time. (As per the requirement of the content)
# Bonus rate may vary from time to time based on Company’s Investment Performance. (As per the requirement of the content)
Disclaimers: IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North Tower, Building 4, Nesco IT Park, Nesco Centre, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 18002098700. Email id: customer.first@indiafirstlife.com, Website: www.indiafirstlife.com. Fax No.: +912268570600. IndiaFirst Life Insurance Company Limited is only the name of the Life Insurance Company and ________________ UIN ____________ is only the name of the Life Insurance Product and does not in any way indicate the quality of the contract, its future prospects, or returns. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd under License. Advt.
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