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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Life Insurance Products

Under a traditional participating endowment plan sold in India, what does the 'reversionary bonus' declared by the insurer represent?

Reversionary bonus is a bonus declared from the insurer's surplus and added to the sum assured. Once declared it becomes a guaranteed addition, payable on death or maturity, which distinguishes it from terminal bonus and from premium rebates.

  1. AA bonus added to the sum assured that, once declared, becomes part of guaranteed benefits payable at death or maturityCorrect
  2. BA one-time payment made only at the time of policy surrender
  3. CA rebate on premium given to policyholders who pay annually
  4. DA bonus payable only if the policyholder survives beyond the maturity date

Explanation

Reversionary bonus is declared periodically out of surplus and added to the sum assured. Once vested, it cannot be taken back and is paid on death or maturity. The surrender-only and premium-rebate options describe different features.

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