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

Under a traditional participating endowment policy in India, what is a 'reversionary bonus' once it has been declared and added to the policy?

A declared reversionary bonus is added to the sum assured and becomes part of the benefit payable on maturity or death. Once vested it is generally not withdrawn, which is why it differs from a terminal bonus that is paid only at exit.

  1. AIt is paid only if the policyholder surrenders the policy in the first year
  2. BIt becomes part of the guaranteed benefit payable on maturity or death and is generally not taken away laterCorrect
  3. CIt is a loan given by the insurer against the policy
  4. DIt is a tax refund given to the policyholder

Explanation

Reversionary bonuses are declared periodically and added to the sum assured. Once added, they become vested and are payable at maturity or on death. They are not a loan, a tax refund or limited to first-year surrender.

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