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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 a 'reversionary bonus' represent once it has been declared by the insurer?

A reversionary bonus is an addition to the sum assured, declared periodically from surplus. Once declared it vests and is payable on death or maturity, unlike a terminal bonus, which is declared only when the policy ends by claim or maturity.

  1. AA bonus paid only if the policyholder survives to maturity, and which can be withdrawn at any time during the term
  2. BAn addition to the sum assured that becomes part of the guaranteed benefit payable on death or maturityCorrect
  3. CA refund of premiums paid if the policy is surrendered in the first year
  4. DA one-time bonus declared only at the time of maturity or death

Explanation

Reversionary bonuses are declared periodically and added to the sum assured. Once declared they are vested and payable at death or maturity. Terminal bonus is the one declared only at exit, which is why the last option is wrong.

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