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    Types of Bonus in Life Insurance

    Last Updated On 10-06-2024

    Life insurance is not just a way of securing finances for unforeseen events; it is so much more. Providing the insured with an impressive growth on the premiums invested, life insurance also acts as an investment tool that helps you financially protect your future and save your funds from inflation.

    However, apart from these wonderful features, some life insurance policies also provide bonus payments to the policyholders on a yearly basis beyond the basic sum assured they are entitled to. This additional amount can be either paid out on policy maturity or upon the death of the insured, based on your policy terms.

    Let us learn about types of bonuses in life insurance deeply so that you can get an idea of when you are eligible for getting a bonus and when you can withdraw/receive it.

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    What Is a Bonus in Life Insurance?

    The term “bonus” in life insurance refers to the additional amount which is offered to the insured when the insurance company earns good profits from its other revenue sources.

    It is like a gift from the insurer’s side, which is payable to the policyholder based on the policy terms and conditions. However, the bonus accrued can be received by the policyholder on the maturity or surrender of the policy or the unfortunate demise of the insured (depending upon the terms and conditions of your chosen life insurance policy).

    To understand the conditions in which a bonus is rewarded, you need to know the types of bonuses in life insurance.

    How is Life Insurance Bonus generated?

    The premiums paid by policyholders of a life insurance company become a part of its asset pool that is utilised for payment of claims in the future. A large portion of these funds is invested in debt instruments secured by the government while allocating little to equities.

    The insurer’s claim experience and returns on investment together are responsible for profit, which it distributes as bonus payments at the end of the financial year. Any excess of assets after the company’s assets and liabilities are valued, may also generate an extra amount to be distributed as bonus.

    Types of Bonuses in Life Insurance

    There are different types of bonuses offered by life insurance companies. These are:

    • Reversionary Bonus

    This type of bonus is added to the sum insured at the policy anniversary. Below are the two categories of reversionary bonuses:

    1. Simple Reversionary Bonus

    This is the simplest type of bonus in life Insurance. It is accrued yearly and is paid when a death or surrender claim is raised by the policyholder or at policy maturity.

    The simple reversionary bonus is declared in the form of a percentage i.e. per thousand of the sum insured.

    The formula for calculating a simple reversionary bonus is:

    Bonus= Bonus rate*(Sum insured/1000)

    Let us take an example: Suppose your sum insured is ₹25,00,000, and the bonus rate is ₹40 per thousand; then your bonus amount will be ₹1,00,000.

    2. Compound Reversionary Bonus

    This bonus is also declared annually but it is not calculated only on the sum insured. The calculation method of this bonus is similar to the simple reversionary bonus, but it is calculated on a total of the sum insured and previously accrued bonuses.

    The formula is as follows:

    Bonus= Bonus rate*[(Sum insured+Accrued bonuses)/1000]

    • Interim Bonus

    Generally declared at the end of the financial year and credited in the ensuing financial year, the calculation of interim bonus is similar to reversionary bonus.

    If a death or maturity claim arises on a policy between two policy anniversaries, an interim bonus will be added to the policy benefits. For a death claim, the Company is paying an interim bonus equal to one year’s reversionary bonus (RB) though the policy has not participated for the full year.

    • Cash Bonus

    A cash bonus is a regular bonus declared annually as a percentage of base sum assured or annualized premium depending upon the product terms and conditions. They accrue at the policy anniversary and are payable as per the product terms and conditions.

    For example - If you have paid ₹1,00,000 as a premium in a year and the cash bonus rate of your life insurance policy is 5%, then you will get ₹5,000 as the bonus.

    • Terminal Bonus in Insurance

    This is additional bonus declared annually and payable on death, maturity or surrender, paid as a percentage of total accrued RBs and CBs paid, if any, or as a percentage of sum assured depending upon the product terms and conditions.


    Due to the uncertainties of life, purchasing a life insurance policy for yourself, your kids, your spouse, and your parents has become the need of the hour.

    With numerous benefits, such as financial security, tax benefits on Term Insurance, and, most importantly, different types of bonuses, life insurance is the best path to a financially secure future for both the insured and his family members.

    Choosing PNB MetLife for buying a life insurance policy means getting a multitude of options to choose from. From family protection solutions to long-term savings plans, PNB MetLife offers a great investment opportunity along with providing security against unfortunate incidents.

    Frequently Asked Questions 

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    At what stage is a bonus declared?

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    Usually, a bonus is declared at the end of a financial year and is credited in the ensuing financial year.

    Which policies are eligible for bonuses?

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    Only those policyholders who have a “participating” or “with-profit” life insurance policy can be entitled to bonuses.


    The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.

    PNB MetLife India Insurance Company Limited Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
    IRDAI Registration number 117 | CIN U66010KA2001PLC028883

    Terms & conditions apply, Benefits stipulated are subject to premiums paid and policies in-force. For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.

    Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details.
    Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
    The marks "PNB" and "MetLife" are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
    Call us Toll-free at 1-800-425-6969, Website:, Email: or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra.

    Beware of Spurious Phone Calls and Fictitious / Fraudulent Offers!
    IRDAI is not involved in activities like selling insurance policies, announcing bonus or investments of premium. Public receiving such phone calls are requested to lodge a police complaint.




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    As your trusted life insurance partner, PNB MetLife is with you amidst the current COVID-19 outbreak. Our policies also cover COVID-19 Claims. In case of a Death Claim, kindly submit the signed Claim Intimation Letter mentioning the policy number, brief of the insured event and other claim documents on the email mentioned herewith. Please write-in to us at or You can also call us on 1800-425-6969 for death claims intimations and for any queries on Monday - Saturday between 10:00 am - 7:00 pm.

    PNB MetLife Insurance, amongst the trusted Life Insurance companies in India, aims to provide a wide range of Life Insurance products that suits the needs of an individual at every stage of his life. Life Insurance Plans range from Term Life Insurance PlansTerm PlanProtection PlansLong Term Savings Plans , Retirement Plans & Child Education Plan.

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