Many people think of a bonus as extra money at work, but in life insurance, there’s a similar concept—called a life insurance bonus. Here’s everything you need to know about it, in a simple, easy-to-understand guide.

1️⃣ What is a Life Insurance Bonus?

· A bonus is an additional amount added to your life insurance policy over and above the sum assured

· Typically given by participating policies, also known as with-profits policies

· Bonus can be reversionary (added every year) or terminal (paid at maturity)

2️⃣ How is the Bonus Generated?

· Life insurance companies invest policy premiums in safe instruments like bonds, stocks, or mutual funds

· Profits earned from these investments are shared with policyholders as a bonus

· Companies may also add surplus from operations as part of the bonus

3️⃣ Types of Life Insurance Bonus

· Reversionary Bonus: Declared annually and added to your policy value

· Terminal Bonus: Paid only at the end of the policy term

· Cash Bonus vs. Paid-up Bonus: Some policies allow you to withdraw bonus as cash, others add it to your maturity amount

4️⃣ Why Life Insurance Bonus is Beneficial

· Increases Maturity Value: Your policy pays out more than the sum assured

· Enhances Financial Security: Helps grow savings without extra investment

· Tax Benefits: Bonus is often tax-free under indian tax laws

5️⃣ Tips to Maximize Your Life Insurance Bonus

· Choose participating or with-profits policies rather than non-participating ones

· Keep your policy active and premium paid regularly

· review company’s past bonus declarations before buying

✅ Takeaway

A life insurance bonus is more than just extra money—it’s a way your investment grows over time, enhancing your financial security. Understanding how it’s generated and utilized can help you choose the best policy and maximize returns.

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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Kokila Chokkanathan

25/11/2025 11:44 AM