PNB MetLife announces Rs 930 crore bonus 582000 customers to benefit | Personal Finance

PNB MetLife on Thursday announced a bonus of Rs 930 crore for eligible participating policyholders, a move that could  benefit 582,000 customers, the insurer said.

“This year’s bonus represents a significant 21 per cent increase from the previous year,” the company stated.

“An additional Rs 161.4 crore brings the total bonus declared this year to Rs 930 crore. The number of eligible beneficiaries has risen by 30,000 policyholders, showing a growth rate of 5.43% compared to last year,” the firm said.

Sanjay Kumar, Chief Investment Officer of PNB MetLife, commented on the development, saying, “The Rs 930 crore bonus declaration this year reinforces our commitment to generating the best possible outcomes for our customers’ financial security and long-term prosperity.”

How is a life insurance bonus generated?

The premiums paid by policyholders contribute to the insurer’s asset pool, which is used to pay future claims. A large portion of these funds is invested in government-secured debt instruments, with a smaller allocation to equities. The insurer’s claim experience and investment returns determine the profit, which is then distributed as bonus payments at the end of the financial year. Any excess assets after evaluating the company’s assets and liabilities may also contribute to the bonus.

Types of bonuses paid out by insurers

Simple reversionary bonus: This bonus is calculated on the sum assured and declared annually. It accrues to the policy each year until it matures or a claim is filed.

Compound reversionary bonus: This bonus is calculated on the consolidated amount of the sum assured and previous years’ bonuses. It is based on compound interest and is payable upon maturity or the policyholder’s death.

Interim bonus: Declared when the insured dies or the policy matures before the end of the financial year. It ensures the policyholder or beneficiaries receive a pro-rata bonus, covering the short duration between bonus declaration dates.

Cash bonus: The yearly bonus is paid out in cash at the end of the year, calculated as a percentage of the annual premium. This allows policyholders to receive their bonus annually rather than waiting until maturity.

Terminal bonus: Also known as a persistency bonus, this one-time payment is made when the policy matures or upon the policyholder’s death. It rewards policyholders for maintaining the policy for a specified period, subject to the insurer’s declaration based on the policy’s performance.

First Published: Jun 14 2024 | 6:19 PM IST

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