Recently LIC declared the bonus rates for the year 2020 – 2021 (As per March 2020 valuation). Let us see the complete details about LIC Bonus Rates for 2020 – 2021 and how they affect your life insurance returns.
LIC of India has declared the latest bonus rates for the valuation period 1 st April 2019 to 31st March 2020.
When you buy a traditional with profit product from LIC, then your returns from such policy mainly depends on what will be the rate of bonus. LIC declares bonus on the yearly basis. Usually, you will not find any such drastic change. But it is always better to track the bonus rates.
Let us say you bought LIC’s Jeevan Anand for the term of 20 years and the sum assured as Rs.5,00,000. If LIC declared a bonus as Rs.45 for this product, then the calculation will be as below.
The bonus rates will be based on three criteria.
# Term of policy-Higher the tenure means higher the rate.
# Sum Assured-LIC bonus depends on per Rs.1,000 of Sum Assured. Hence, if you bought higher sum assured policy, then your bonus accumulation will be at the higher end.
So from above example, if LIC declared you Rs.45 as bonus per Rs.1,000 sum assured for 20 years policy, then the bonus accumulation for that year will be as below.
Rs.22,500=(Rs.45 x Rs.5,00,000)/Rs.1,000.
Remember this Rs.22,500 will not be payable to you. But it will be with LIC and you receive this amount during the time of death claim or maturity. The most important point to note that they will not add any amount on this Rs.22,500. It will remain same till the period of death claim or maturity date.
There are various types of benefits LIC policies offer you like Bonus, Loyalty Addition or Final Additional Bonus.
# Simple Reversionary Bonus
LIC will declare this on yearly basis and added to your policy account. You will get it either at maturity or if there is a death claim. If you decide to exit from the policy during the policy period by surrendering it, then a certain portion of such accrued bonus will be payable to you. Do remember that this type of bonus does not compound every year and hence it is called a simple reversionary bonus.
# Final Additional Bonus (FAB)
Final Additional Bonus (FAB) is a one-time additional bonus, which is paid along with the maturity amount. It is an additional one time bonus along with the simple reversionary bonus and added to the policy account. As I told, it is a one-time payment you will receive at maturity, death claim if you surrender it (one year preceding the date of maturity).
# Loyalty Bonus (LA)
Based on the policy features, certain LIC policies are eligible to avail this LA. LA is also a one time payment kind of benefit. Unlike the simple reversionary bonus, which becomes a part of the policy benefits as and when it is declared, loyalty additions shall be available to the policyholder only at the time of exit from the policy. Hence, they became the part of policy benefit at once during the policy exit (due to maturity, death or surrender)
In simple, I explained how to calculate bonus for a year. But LIC offers different products like the endowment, limited endowment or money back plans. In such a situation, you may find it difficult to calculate returns on your LIC plan. Hence, I created a video about this.
This below video will explain you about how to calculate returns on your LIC plans using excel sheet. It is too simple and convenient for you to calculate.
Hope you got clarity about the importance of bonus rates for your traditional plans. Now let us concentrate on recently declared LIC Bonus Rates for 2020 – 2021
The below reversionary bonus rates are applicable for policy year entered upon during the inter valuation period i.e. 01/04/2019 to 31/03/2020 and in force for full sum assured as on 31/03/2020. It would apply to policies resulting into claims by death or maturity (including those discounted within one year of maturity) or surrendered on or after 01/01/2020.
The interim bonus rates are applicable to policies in respect of each policy year entered upon after 31/03/2020 and result into claims by death or maturity (including those discounted within one year of maturity) or are surrendered during the period commencing from 01/01/2020 and ending 9 months from the date of next valuation.
This time, I separated the plans in two ways. One for the old policies which are closed and another list for the new policies which are currently available for purchase.
The above list is for the basic policies. In the below list, I am sharing with you the remaining special products which are closed.
Let us now look into the bonus rates of new plans.
As I mentioned above, FAB is a one-time additional bonus payable to policyholders. The minimum term of the policy to be eligible for FAB is 15 years and above. LIC maintained the same FAB rates which are available for the last year. You can refer the last year’s FAB rates at the LIC website.
his Final (Additional) Bonuses are applicable In the case of Plans of Groups 1, 2, 8, 9 and 10 mentioned below.
Few plans like Jeevan Saral or Jeevan Shree have additional beneficial features like offering you the LA. I will try to share the LA rates for Jeevan Saral, Jeevan Shree and for few popular plans. .
Let us now look at the LA rates for most popular product of LIC Jeevan Saral.
Conclusion:- It is evident that LIC policies even though invested heavily by Indian investors, are low in returns and the returns may vary anywhere around 5% to 6%. For long term goals, relying on such debt products and also illiquid products may not be a prudent idea of wealth creation. It is up to you to judge whether you want to go ahead and buy such low yielding products are not. At the same time, those who already invested may continue if you feel 5% to 6% tax-free returns are best for your long term goals.
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View Comments
What is the loyalty Addition for New Jeevan Shree Table 151 for 16 year term plan. It is very difficult to get this exact info for Table 151
Also how does one get this info as even the branch is not very helpful
Dear JK,
It ranges from Rs.35 to Rs.60 per Rs.1,000 Sum Assured. You can easily get this information from the nearest branch.
Thank you for your prompt response sir! Would we be eligible for Loyalty addition for 2021, if we surrender now or should we wait till Jan 2022? I read somewhere that Loyalty additional declared as of March 2021 will apply to policies maturing after Dec 31, 2021. Not sure how that works and if there is a different process for surrender vs Maturity?
Dear Ajay,
How much additional amount do you get by waiting for another 6 months? It is peanut. Better to close now.
Apologies for the typo sir, I meant to say we started our jeevan saral policies in March 2010, so have completed 11 + years. Would it make sense to surrender them now and would we be eligible for the Loyalty addition declared in Sep 2021 or do we have to wait till Jan 2022, to get the latest Loyalty addition benefit?
Dear Ajay,
As it completed 10+ years, better to surrender.
Dear Sir - This is very useful. We have a couple of Jeevan Saral policies that we started in March 2020. We would like to surrender these policies but got understand that LIC has declared the Bonus/Loyalty addition for 2021 in Sep this year. Should we wait till Jan 2022 to be eligible for the Loyalty addition or would it be applicable even if we surrender now i..e oct 2021
Dear Ajay,
In this plan, you will get LA only if you surrender after 10 years but not before that. Hence, you have no option but to close after 10 years.
I have started a Bima diamond policy of sum assured 100000 in Feb 2017. Paid premium of Rs. 6235 yearly for 2017, 2018 and 2019. I did not paid premium for 2020 and 2021.
Kindly suggest me approximately how much amount I will get if I surrender my policy now
Hello,
My Policy for plan T-112 matures in Aug.21
Loyality bonus rates for 2021-22 will be declared in the month of Sep-21
What Loyality bonus rates will be applicable for my policy as maturity will be prior to declaration of rates ?
Thanks
Dear Anil,
It is the previous year LA.
Dear Mr. Basavaraj,
Thank you for sharing this.
However, your conclusion is incomplete.
In your conclusion, where you mentioned LIC's return 5% to 6%, you seem to have forgotten to 2 VERY Important words: "Guaranteed" & "Safe".
An article's conclusion must always give complete & impartial information.
Dear Naresh,
GUARANTEED and SAFE at what cost????
I hope the day will come soon when the poor indian common man will stop considering LIC as an investment avenue. Not to mention the fact that the government is seriously considering divestment of it's holding in LIC.
I am also sharing a moneylife link, to an article on how Jeevan Saral has the potential of being a Jeevan Terdha ..
https://www.moneylife.in/article/jeevan-saral-lic-pays-up-rs2667-lakh-after-chairman-is-summoned-by-consumer-commission/59165.html
Dear SRR,
God BLESS YOU and if you are confident, then let LIC relaunch one more new version of this product :)
Hi
I have a clarification on the Jeevan Shree loyalty bonus rate. My 5lakh policy of 20year (with 12 premiums paid) is maturing in July '21. Loyalty bonus of 2.75L @ 550/1000 rate is indicated in the maturity claim statement from LIC
I remember checking the loyalty bonus last year and the table indicated 810/1000. I know that rate applied for policies maturing last year and LIC issues rates for every year separately but what explains a drop of 260/1000?
Can you throw some light on the basis of loyalty bonus rate calculations of LIC, apart from the usual 'it is based on the gains from investment that LIC wants to say'!
Thanks in advance & regards, Sreedhar
Hello Sreedhar,
My Jeevan Shree policy with exact details as your Policy (i.e 5lakh policy of 20year & 12 paid premium) is maturing next month (Aug-21).
Can you share the breakup of amount and what rates were given to you by LIC and did they deducted any tax ?
Thanks
Anil
Dear Sreedhar,
Sadly neither LIC discloses why the fall nor we can question it.
Dear basu ji ,
Plan no 152 of lic jeevan rekha
Please give a complete chart of final addtional bonous (f.a.b)chart of this plan
Policy is fully paid up at the year 2009
Thanks
Regards
Nikhil dwivedi
Dear Nikhil,
With whatever limited information I have, I shared it. However, you can get the same on LIC website or with the branch.