Bonus depends on the insurer’s profit while ‘guaranteed addition’ is an assured addition to the policy and is disclosed to the policyholder upfront while buying the policy.
Good news for ICICI Prudential Life Insurance policyholders who are paying premium on traditional policies such as endowment or money back plans. ICICI Prudential Life Insurance, India’s largest private life insurer in terms of new business sum assured, has declared an annual bonus of Rs 968.8 crore for FY2022 to all eligible participating policyholders. This is the 16th consecutive year of bonus payment and also the highest ever by the company till date, exceeding the FY2021 bonus by 12%.
All participating policies in-force as of March 31, 2022 are eligible to receive this annual bonus, which will be added to the policyholders’ benefits. Almost a million participating policyholders will benefit from this, taking them closer to achieving their long-term financial goals.
Last year, the insurer had announced an annual bonus of Rs. 867 crore for all eligible participating policyholders for FY2021. As per the company, in FY2021, the bonus declared was 10 per cent higher than the bonus announced in the last fiscal.
Bonus is not payable to every policyholder but depends on the kind of policy one holds. Unit-linked insurance plans are not eligible to get bonus as they are market-linked plans and are non-participatory in insurer’s profits.
Although bonus is paid only to traditional policyholders, not all of them may qualify. Traditional insurance plans, such as endowment or money-back plans, can either be ‘participatory’ (or ‘with-profit’) plans, thereby qualifying for bonus, or ‘non-participatory’ (or ‘without-profit’) plans that do not qualify for bonus.
Bonus is declared either as a certain amount per Rs 1,000 sum assured or as a percentage of the sum assured. For example, bonus may be Rs 50 for every Rs 1,000 of the sum assured. So, for a policy with the sum assured of Rs 1 lakh, the bonus amount will be Rs 5,000. In the above example, if the term of the policy is ten years, the total bonus accumulated on maturity will be Rs 50,000.
The returns in some ‘with-profit’ policies may not entirely depend on bonuses. Instead, in such policies, there is a ‘guaranteed addition’ (GA) to the policy. Bonus depends on the insurer’s profit while ‘guaranteed addition’ is an assured addition to the policy and is disclosed to the policyholder upfront while buying the policy.
You may check your policy document to see if you as a policyholder are eligible for the bonus announced. It will clearly mention that the policy participates in profit or is a non-participatory policy.