I have a endowment policy that will mature in 5 years. Can you explain how expiration benefits are calculated? Will I receive only the amount insured, or will there be additional bonds or benefits included?
Mayur
The expiration value in a endowment policy is normally calculated as insured sum (value guaranteed to expiration) + declared bonds + terminal bonus (if appropriate, according to the terms of the policy).
If your policy bonus says that bonds are included, you will receive the insured sum + bonds.
The bonuses are only available, it is a “participating plan”, and can vary every year, according to the company’s profits.
In a “non -participant” plan, there may be no bonds.
Bonds are not guaranteed, and depending on the type of policy, the rates are declared on the company’s websites and as an intimidation for the head of the policy, every year or when declared.
Bonds are normally based on the insurance company, the type of policy, how long the policy is in force. It is not guaranteed, and rates can change every year. Bonuses are usually the following types. A policy can have a combination of the titled bonds or only one of them. Reversion bonus, paid at the end of a year of politics; Composite reversion bonus, paid at the end of the year, with a multiple composed in the previous bonds; The terminal bonus, as the name implies, paid at the end of the year, normally as a reward of loyalty to pay the regular premium and maintain the plan of the plan; Provisional bonus, paid for the intermediate period of the occurrence of an event (death for death, surrender or expiration of the policy) and the previous bonus date; The cash bonus, typically calculated as a percentage of the annual premium paid, and added to the total fund each year.
How the bonus is calculated is explained here, quotes two methods:
Method 1
Nitin has bought a participating endowment plan with an insured sum of ₹ 10 Lakh. Let’s say this plan announced a simple reversion bonus at the rate or 2 percent of the sum secured for a particular year.
Insured sum: ₹ 10.00,000
Reversion bonus rate: 2 percent
Bonus pays: ₹ 20,000 (10.00,000 x 2 percent)
Method 2
Nitin has bought a participating endowment plan with an insured sum of ₹ 10 Lakh. Let’s say this plan announced a simple reversion bonus at a rate of ₹ 30 for ₹ 1,000 of the sum secured for a particular year.
Insured sum: ₹ 10.00,000
Reversion bonus rate: 30 per 1,000
Bonus payable: ₹ 30,000 (10.00,000/1,000) x 30)
The author is vice president and head of B2B2C in Insurancedekho
Posted on April 19, 2025