BONUS Rules
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Transcript of BONUS Rules
* RULES FOR PAYMENT OF BONUS
AND GUARANTEED ADDITION*
The Corporation carries out an actuarial valuation of its liabilities on all
policies annually i.e. 31st March of every year. The assets of the corporation are also valued.
The excess of the value of assets over the amount of total policy liabilities is called valuation
surplus. After giving 5% share to Govt. of India, 95% of total surplus is distributed among
policyholders who have “with profit” or “ participating policies”.
Following are General Guidelines for payment of simple Reversionary Bonus,
interim Bonus, Final (additional) Bonus.
A. SIMPLE REVERSIONARY BONUS -
1) Bonus is payable on Basic Sum Assured in respect of participating or with profit
policies. These Bonus rates are applicable for policy year entered upon during the
Inter valuation period i.e. from 1st April….. to 31
st March….. and in force for full
sum assured as on 31st March….
2) Policies issued by corporation or previous insurer prescribing a fixed addition to
sum assured like under GTB policy, Guaranteed addition or Loyalty addition or
by any other name are not governed by the Bonus declared as per valuation
results.
3) With effect from the policy anniversary falling on or after 1-4-1985, bonus is to
be paid at rate equal to LIC policies even under unit policies falling under Group
0 to 9. For example, if a unit policy falls under Group 8, upto 31-3-1985, Bonus
was paid @ 80% of LIC rate. From 1-4-1985 & onwards it will be at par with LIC
policies.
4) In order that a policy should become eligible for Bonus, it is necessary that the
policy should be in force for the full sum assured as on the Date of valuation.
5) If a policy is in full force on the date of valuation & on the books of the
corporation as on date of valuation, but subsequently made paid up without
payment of all premiums falling due in the policy year on date of valuation, bonus
for the policy year will be proportionally reduced.
6) Bonus declared on the policies, issued on or after 1-4-1973, the bonus shall vest
only if the policy has been in full force for the full Sum assured for 5 years from
its date of commencement.
It is clarified that not only full 5 years premium should be paid but a period of 5
years should also elapsed from date of commencement of policy (CO/PHS/86/23
dt. 5-3-80)
7) As per co circular CO/PHS/528 dt. 16-7-86, in Discounted value of Maturity
Claim of Policy having 5 years term if desired before completion of 5 years by
policy, then Bonus for 5 years will be allowed.
However w.e.f. 3/97 valuation( CO/ACT/VAL/1622/4 dt. 25-11-97) a policy
issued with 5 years term, if discounted in the last policy year, then Bonus for full
5 years will not be allowed.( this condition will have no value, after introduction
of 3 years rule for vesting of bonus)
8) W.e.f. 31-3-2002’s valuation,ref: CO/ACT/VAL/1826/4 dt. 9-9-2002 & further
clarification from c.o. ref: Act/val/v-97-2 dt. 27-1-2003. Bonus declared on the
policies will vest provided they have in force for a period of 3 years from the date
of commencement & are on the books of corporation either for full sum assured
or for paid up value as on date of circular i.e. 9-9-2002.
In short, under a policy where premiums have been paid for 3 years and date of
death is up to 8/9/2002, bonus for such 3 years will not vest even if death claim
payment have effected on and after 9/9/2002 and onwards.
9) In case of death claim in respect of policies issued on or after 1-4-73, full amount
of Bonus will be paid if policy is in full force on the date of death even during the
period of 5 years from the date of Risk. From, 9/9/2002, the period is further
reduced to 3 years.
10) In respect of death claim, the bonus is payable for the number of years for which
premiums have been Paid/ Recovered.
11) Under New Jan Raksha policy (plan 91) after paying at least 2 full year
premiums, death cover is extended for 3 years. If death occurs during this 3 years,
full sum assured is payable, but bonus will be paid for actual No. of years
premium paid. No premiums are also recovered for this 3 years period i.e. unpaid
premiums from claim amount.
12) In case of policy converted from “ without profit” plan to “ with profit plan “ it
will become eligible for bonus, only from the first policy anniversary falling in
the valuation period on the date of alteration. For such alterations effected upto
31-12-98, the qualifying period for vesting of bonus i.e. 3 or 5 years will be
reckoned from the date of commencement. No. of years bonus payable will be
reckoned from the date from which policy participate in profit. For deciding rate
of Bonus, Term of policy will be reckoned from date of conversion.
However, for alterations, which are effected from 1-1-99 & on words, the
qualifying period of 3 years for vesting of Bonus, the term for determining the
Bonus, rate and the number of years Bonus payable, will be reckoned from the
date of conversion.
13) Under Plan No. 27 – Convertible whole life policies, policies which are converted
regarding cases of conversion of policies from without profit to with profit on or
Before 31-12-98, the qualifying period of 3 or 5 years for vesting of Bonus will be
reckoned from date of commencement, entire term of policy from Date of
commencement of policy will be taken into account to determine the Bonus rate.
But No of years bonus payable will be reckoned from date of conversion. (Ref :
CO/Act/ PS dt. 20/12/2002)
For conversions from 1-1-99 & onword, the qualifying period of 3 or 5 yrs. For
payment of Bonus, term of policy to decide Bonus rate, No. of years Bonus
payable will be reckoned from date of conversion.
14) In respect of policies under Jeevan Kishor (plan – 102) & Jeevan Sukanya (plan –
109), Bonus will not vest during the waiting period i.e. period from date of
commencement of policy to date of commencement of risk. The reversionary
Bonus for waiting period from date of commencement will vest on policy
anniversary from which the risk is covered or at the end of 3 or 5 years from
commencement whichever is later, provided policy is in force at that time. It has
been also clarified that eventhough premium due as on the date of commencement
of risk (i.e. policy anniversary) is not paid, then also bonus is payable for waiting
period.
For example – Date of commencement 1-1-90 mode Qly. Date of commencement
of Risk 1-1-95 FUP Qly 1 – 95. Date of surrender 2-1-95. In this case, Bonus for
5 years from 1-1-90 to 1-1-95 i.e. Waiting period is allowed, eventhough
premiums From 1-95 is not paid. Date of claim/surrender should be on or after
date of commencement of risk. (CO/Act/PS dt. 20/12/2002)
15) CDA Policies (Table No. 41, 50, 80 & 81) will participate in profits from the
deferred date i.e. either on attaining 18 or 21 yrs. As per plan specifies. Under
plan 41 & 80, policies will participate in profits after L.A. has attained 21 yrs. &
under plan 50 & 81, policies will participate in profits after L.A. has attained 18
yrs. Here deferred date means the date on which risk will commence i.e. 18 yrs.
Or 21 yrs. Up to 3/1997’s valuation, for determining the Bonus rate, policy
Term from date of commencement of policy will be taken into account, but Bonus
is payable from date of vesting.
However,w.e.f. 3/98’svaluation, policies vested on or before 31/12/1998, the
bonus rate will be determined with reference to the policy term counted from the
date of commencement of the policy.
For policies vesting on & after 1-1-99,The Bonus rate to be applied will be
determined with reference to the policy Term counted from Date of vesting &
NOT from the date of commencement.
16) Under New CDA plan No. 92, policy will participate in profit from the date of
commencement of risk. Under this plan, risk will commence from policy
anniversary on which the child attains age 12 yrs( NBD). For finding out, date of
commencement of risk, add 12 in Date of birth, then on or after following policy
anniversary.
For finding out, date of vesting, add 18 to Date of Birth. From this date (not next
policy anniversary) policy will vest.
Upto 31/3/1997’s valuation,for deciding the bonus rate, term from date of
commencement should be counted. Bonus is payable for the years from date of
commencement of risk to date of maturity or death claim which ever is earlier.
W.E.F. 31/3/1998’s valuation effective from 1/1/1999,For policies which have
vested upto 31/12/1998, bonus rate will be determined with reference to the
policy term counted from the date of commencement of policy. For policies
vested on and after 1/1/1999 & onwards, for deciding the bonus rate, term on or
after from next policy anniversary following date of vesting to date of maturity
should be counted.(not original policy term). However, bonus is payable from
date of commencement of risk to date of maturity.
W.E.F. 31/3/2007’s valuation effective from 1/1/2008, the bonus rate will be
determined with reference to the policy term counted from the date of
commencement of risk.
17) Under Jeevan Balya Plan No. 101, policy will participate in profit from the
vesting Date. Policy will vest in L.A. when he attains 21 yrs Of his age.
Up to 31/3/1997’s valuation, for deciding the bonus rate, term from date of
commencement should be counted. Bonus is payable for the years from date
vesting to date of maturity or death claim which ever is earlier.
W.E.F. 31/3/1998’s valuation effective from 1/1/1999,For policies which have
vested upto 31/12/1998, bonus rate will be determined with reference to the
policy term counted from the date of commencement of policy. For policies
vested on and after 1/1/1999 & onwards, for deciding the bonus rate, term on or
after from next policy anniversary following date of vesting to date of maturity
should be counted.(not original policy term). However, bonus is payable from
date vesting to date of maturity.
17) Under Jeevan sathi Plan No. 89, Bonus is payable on date of maturity or upon the
death of second life whichever is later both under in force & paid up policy.
18) Under Jeevan Sukanya Plan No. 109, Bonus is payable on date of maturity i.e. on
completing 50 yrs. By L.A. or her death which ever is earlier. But on death of her
husband, Bonus is not payable.
19) Under Plan 90 & 103, Bonus is payable on date of maturity under Inforce policy
claim. However under death claim of paid up policy, Bonus is payable along with
paid up value immediately after death claim.
20) Under Whole Life Policies or limited payment whole life policies, the policy year
current on the date of death will also be taken into account for payment of Bonus.
In respect of whole life policies, where claim is settled as maturity claim, Bonus is
payable taking the term of the policy upto the end of the policy year current at the
time of consideration of payment.
21) Under CDA policies (41,50,80,81,92,101) for purpose of determining the
qualifying period of 3 years for vesting of Bonus, the period from inception of
policy should be taken & Not from date of vesting. This means, it is NOT
necessary to pay the premiums for 3 years from date of vesting for deciding the
qualifying period of 3 years for vesting of bonus.
B. INTERIM BONUS -
1) The Bonus rates declared as on 31st March of every year will vest from/after 9
months from the date of valuation. During this pendency of declaration of the
valuation result, Bonus is paid at rates of earlier valuation in respect of those
policies becoming claim during this period. This bonus is called as Interim Bonus.
2) The maximum No. Of years for which interim Bonus may be paid is 2 or 3 years.
3) In respect of all participating policies becoming claims by death or maturity or
discounted during the period commencing from 1st January and ending 9 months
from the date of Next valuation in respect of each policy year entered upon after
31st March of Earlier year, provided the policies are in force for full sum assured
as on date of claim/discount.
4) In respect of policies, which are SURRENDERED during the intervaluation
period i.e. after 1st April, & ending 9 months following the date of Next
valuation, provided such policy is in force & on books of the corporation as on
date of valuation.
For example, policy-having date of commencement on 28-12-1989 & in force for
full sum assured is surrendered on 1-4-97. It is entitled for interim bonus for the
policy year commencing from 28-12-96 to 28-12-97 for valuation year 3/97; at
the rate declared as per valuation as on 31-3-96 in proportion to the premium paid
for the policy year from 28-12-96.
If above policy is surrendered on 31-3-97, then policy is not entitled for interim
Bonus. Because, policy is not on the books of corporation as on date of valuation
i.e 31/3/1997.
5) Interim Bonus is not calculated while calculating surrender value for Loan.
6) While declaring Bonus Rate for the year 31-3-2004, separate Bonus Rate for
interim Bonus was declared. For example-
The Interim Bonus rates are applicable to policies in respect of each policy year
entered upon after 31-3-2005 (i.e. From 1-4-2005) & result into claim by
death/maturity/discount or surrendered during the period commencing from
1st January & ending 9 months from date of next valuation OR policies issued on
& after 1-4-2005 & resulting into death claim during the period 1-1-2006 & 9
months ending date of next valuation (i.e.upto 31-12-2006), Bonus at interim
Bonus rate is payable.
7) In case of death claims under New plans, which were introduced after the yearof
valuation, where No bonus rates were declared in said valuation. It has been
clarified that for such policies, bonus declared as per Next valuation is payable.
Refer co/act/val/v-03 dt. 8/3/2004.
C. FINAL (ADDITIONAL) BONUS -
1) Final additional Bonus (FAB) is not payable when policy is discounted /
surrendered upto 31/12/2005.
As per valuation at 31-3-2005, which is effective w.e.f. 1-1-2006 If policyholder
discounts the policy within 1 year preceding the date of maturity, the policy will
be eligible for FAB. Under plan 112, Jeevan Shree Plan, if L.A. discounts the
policy within 1 year preceding date of maturity, then Loyalty addition is also
payable (CO/Act/2037 & 2046).
2) FAB is not payable in case of paid up policies.
3) FAB is payable, if policy is in full force for full S.A. till date of maturity / Death.
4) No FAB is payable under Death claim of Money Back type of policies.
However, w.e.f. 3/2006’s valuation effective from 1/1/2007(refer co/act/2095/4)
FAB is now payable under Money back type policies
i.e.24,25,26,73,74,75,76,93,106,107,108 . FAB is payable where date of death is
on and after 1/1/2007 & onwards. These bonus rates are applicable for terms in
respect of Maturity, Discounted maturity claim, no. of years premiums
paid/recovered in respect of death claim.
5) The concept of FAB was introduced with the valuation of 31-3-79. At that time,
in case of maturity claim, if premiums have been paid for 15 years term or in
death claim, as on date of death policy should have completed 15 years, then only
FAB was payable.
However, w.e.f. 31-3-83’s
if number of years for which premiums are received /
deducted / recovered are 15 yrs. Or more in case of maturity / Death claim & if
policy is in full force as on date of claim, then FAB for No. of completed years of
premiums paid is payable.
6) The Rate of FAB depends upon the duration of said policy participated in profit.
Therefore for calculation of FAB under a policy, the qualifying period & the
duration of policy Term should be reckoned from the date of eligibility for simple
Reversionary Bonus.
7) In case of death claims under single premium / Fully paid up limited payment
policies, the no. of years lapsed would mean the no. of policy years elapsed
including of the policy year in which the death takes place, for payment of FAB.
8) In case of progressive protection policies (plan No 79). Which are in full force,
the FAB will be based on the sum assured in force on the date of death / date of
maturity.
9) In case of cash & cover, anticipated whole life policies the FAB is payable only if
death takes place after the end of premium paying period.
10) In case of CDA plans No 41,50,80 & 81 the term/duration at death will be
reckoned from the deferred date i.e date of vesting.
In case of New CDA plan 92, Term / duration at death will be reckoned from risk
commencing date.
11) In the case of multi – purpose policies in respect of death claims the FAB will be
paid only at the end of the original term along with reversionary Bonus.
12) The policies for which death claim is payable as per claim concession clause,
FAB is payable taking the term of policy up to policy year for which premiums
recovered.
13) In case of maturity claims, if premiums have not been paid during the last policy
year, but the policy was in force for full sum assured on the policy anniversary
prior to the maturity date, the claim is paid for full sum assured on Maturity date
with reversionary and interim bonus. In such case, FAB is also payable for full
sum assured. However, where policy term & premium paying term are different
and if any premium of given premium paying term remains unpaid, then above
provision is NOT applicable.(co/act/ps dt/22/9/2005)
D) ONE TIME BONUS –
To commemorate the Golden Jubilee Year of our Independence, the corporation has
declared one time Bonus with valuation of 31-3-97. All policies issued with date of
commencement upto 31-3-76 & which are in full force as on date of valuation 31-3-97, are
entitled for Bonus.
The effective date for payment of Bonus is 1-1-98. Hence for claim arisen between
1-4-97 to 31-12-97 are not eligible for this Bonus Rate are as follows per 1000 sum assured.
Sum Assured Group Date of commencement of
Policies Upto 25,000 25,000 to 50,000 50,001 & Above
on or before 31-3-71 5 20 40
After 1-4-71 to 31-3-76 2.5 10 20
E) GUARANTEED ADDITION & LOYALTY ADDITION –
1) Guaranteed & Loyalty addition will accrue at the end of policy year for which
premium have been paid, provided policy is in force.
2) For vesting of Guaranteed addition, there is no precondition of payment of 3 or 5
years premium.
3) Loyalty addition is payable after completing certain No. of years as shown in
schedule elsewhere ( i.e. chronological data).
4) Loyalty addition is not payable if policy is surrendered / Discounted or become
paid-up.
5) In case of death, provided prescribed rates of GA & LA, same will be calculated
for every completed policy year for which premium have been paid. Hence,
incase of death claim within 1 year of policy, even though premiums may have
been paid for 1 year, Guaranteed addition is not payable. (THIS PROVISION
HAS CHANGED SEE ITEM NO 8)
6) In the year of death, even though we recover the premiums for remaining policy
anniversary Guaranteed addition is not payable. In short, GA & LA is not
payable for the policy year of death. (THIS PROVISION HAS CHANGED SEE
ITEM NO 8)
7) Under children money back policy No.113 & Komal Jeevan Plan 159,
Guaranteed addition will not vest during waiting period i.e. period from date of
commencement to date of commencement of Risk.
As per letter dated 20/12/2002 Ref: ACT/PS, even though the premium due on the
date of commencement of risk is not paid, but premiums during waiting period
have been paid then, Guaranteed addition from date of commencement will be
paid provided date of death / date of surrender is on or after date of
commencement of risk.
In short if FUP under the policy & moth / year of policy anniversary are same,
then Guaranteed addition is payable.
8) As per CO/ACT/2071/4 dtd. 3.5.2006, special provisions to Guaranteed additions
have reviewed. At present, G.A. is not allowed for a policy year unless that
policy year is completed. Now it has been decided (1) In case of death claim
under a policy with G.A., the unpaid premiums, if any, for the policy year in
which death of the Life Assured occurs, are recovered from death claim proceeds,
Guaranteed addition will henceforth be payable for that policy year also. (2) In
case of surrender & paid-up policies, the Guaranteed addition for the Last policy
year will henceforth be added on proportionate Basis. e.g. if 2 months premiums
have been received for the last policy year, then 1/6th
of G.A. for the Last policy
year shall be added.
Here, last policy year means respective policy year in which premiums have been
paid partly.
As per further classification, for death intimations received after date of circular
i.e 3/5/2006 where death is happened prior to this date, Revised rule of
Guaranteed addition is applicable.
9) As per, co/crm/ps/pol cond/rg dt.28/10/2006,the provisions of circular ref:
co/act/2071 are also applicable to single premium policies. This means under
single premium policies, the year in which death takes place or policy is
surrendered, guaranteed addition for that year is payable fully.
10) As per co/crm/ps dt.3/1/2007 , in case of fully paid up policy, if discounted in the
last policy year, then full guaranteed addition for the last policy year shall be
discounted upto the date on which the discounted claim is calculated and paid.
11) As per valuation circular dt.19/9/2007 ref: co/act/val/2118, loyalty addition
declared in respect of plans (112,137,151,154 to 157,158,159) will apply to all
policies Maturing after remaining in force or discounted in the last year of policy
or in case of death claim sub to the conditions applicable to each plan. Loyalty
addition is payable for policies which are surrendered. For rates of loyalty
addition and rules see rates of bonus page.
F) SPECIAL ONE TIME REVERSIONARY BONUS
1) LIC has completed the 50th
year i.e. golden Jubilee Year of its commencement.
Keeping this occasion in view, LIC has declared ‘special one time reversionary
bonus’ as per valuation of 31/3/2005 as per co/act/valu/2037/4 dt. 8/11/2005. This
bonus is applicable for policies in force as on 31/3/2005 or subsequently revived
provided they are otherwise eligible. This bonus is payable under such plans
which are eligible for simple reversionary bonus under said valuation.
2) This Bonus is payable under policies Maturing or becoming claim by death or
surrendered on or after1/9/2005. the date of death or date of maturity should be on or
after 1/9/2005. the date of death or date of maturity should be on and after 1/9/2005.
The date of receipt of application of surrender value should be on and after 1/9/2005.
Cases prior to this date are not eligible.
3) Rates of one-time simple reversionary Bonus rates depend on date of
commencement of policy.
4) This bonus is NOT payable under without profit policies or policies with
guaranteed addition or loyalty addition..
5) Rules that are applicable to vesting of Bonus, eligibility of bonus, qualifying
period of bonus are the same that were applicable to simple reversionary bonus.
Example on Bonus Calculation
(1) Calcuate Interim & Vested Bonus under following with 3 different date of
surrender :
Policy No……… Risk date 15.5.1981 P&T 14-20
S.A. 5000 Mode – yearly FUP 5/2000
No. of yearly premiums paid 19 years
ANS –
Date of Surrender 31-12-99 Date of Surrender between
1-1-2000 to 31-3-2000 i.e.
1-2-2000.
Date of Surrender between
1-4-2000 to 31-12-2000 i.e.
1-4-2000
Paid up value 3800
Vested Bonus @
3/98 Valuation
For 17 yrs. 1006 x 5 = 5030
Interim Bonus For
1 year @ 3/98’s
Valuation 71 x 5 = 355
9185
Here Premiums have been
paid for 19 yrs. But vested
Bonus for 17 yrs. & interim
Bonus For 1 year at 3/98’s
Valuation is payable 3/99
valuation is applicable from 1-
1-99.
Bonus for 1 year is not
payable . Because premium
paid for 19th
year is of
valuation of 3/2000 & on date
of valuation, policy is not
books of corporation as on 31-
3-2000 since surrendered on
31-12-99
Paid up value = 3800
Vested Bonus @
3/99 Valuation
For 18 yrs. 1077 x 5 = 5385
Interim Bonus = Nil
9185
Here vested Bonus for 18
yrs. As per 3/99’s Valuation
is payable 3/99’s Valuation
is applicable w.e.f. 1-1-
2000.
But Bonus for 1 year is not
payable since premiums
paid for policyyear 5/99 to
5/2000 is for next valuation
of 3/2000 & policy is not in
the books as on 31-3-2000
since surrendered on 1-2-
2000.
Paid up value = 3800
Vested Bonus @
3/99 Valuation
For 18 yrs. 1077 x 5 = 5385
Interim Bonus = 355
9540
Since policy is surrender 9
months following the date
of valuation i.e. 3/2000 &
policy is participating in
profits as on 31-3-2000.
Bonus for 1 year as interim
Bonus at valuation of 3/99’
is paid .
If policy with Qly. Mode &
FUP 2/2000. Surrendered
on 1-4-2000 than Interim
Bonus is not payable reason
– policy not participating in
valuation of 3/2000.
Example – 2Calculate Bonus under following (surrender). Date of commencement
20-03-85, mode Hly., Fup – 9-90 SA 10,000, P & T 14-10, No. of yrs. Premium paid 51/2
yrs.
Date of Surrender 1-10-90 Date of Surrender 10-01-92
Paid up value 5500
Vest Bonus for 5yrs. @
3/89’s Valuation 280 x 10 = 2800
Interim Bonus for ½ yr.
@ 3-89 Valuation 32 x 10 = 320
8620
Policy is surrendered 9 months from the
date of valuation & is participating in
3/90’s valuation .
Hence interim Bonus at 3/89’s valuation
rate for 6 months is payable.
3/90’s valuation is applicable from 1-1-
1991.
Paid up value 5500
Vested Bonus as per Valuation chart of 3/90
Is Rs. 346 for 6yrs
33 for ½ year @ 3/90 valuation
313 x 10 = 3130
8630
As on date of surrender 3/90’s
Valuation rates are known to us .
Hence there is no Question of giving any
interim Bonus.
Proportirate Bonus for 6 month at 3/90’s
valuation is given; since 3/90’s valuation is
applicable.