Insurance Blog

How is the maturity returns of a LIC policy calculated

In most of the Traditional plans in LIC, there will some maturity returns provided to the policy holder on maturity of the policy. On in case of Term plans, Health insurance plans, there wont be any maturity returns at the end of the policy term. Incase of these traditional plans, the returns that will be provided will not be a fixed value. It will always vary. Generally, the maturity returns comprises of 3 components (Sum Assured + Accured Bonus + Final Additional Bonus) . First will be the Sum Assured (SA). The SA is a fixed value which will be decided by the policy holder at the time of purchasing the policy. The second will be the Reversionay bonus or Accured bonus or Simple reversionary bonus (all this represents the same thing) . The accured bonus will be declared by LIC for every policy at the end of every financial year.  The amount of Bonus will be declared in units of Rs.X for 1000 SA. This bonus value will be different for each type of product and for the same product with different policy term (tenure). So, the accured bonus for a policy will be declared each year starting from the year when the policy was purchased till the policy gets matured. For a traditional policy with term 18 yrs, accured bonus will be declared 18 times. The bonus declared for each year will be added up to give the Accured Bonus. The third comes the Final Additional Bonus (FAB). FAB may be declared only once for a policy at the end of the policy term. The FAB will also differ for each plan and also for each term for the same product. The sum of all the 3 terms gives the Maturity returns.