Bonus Rates of Postal Life Insurance Plans

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Postal life insurance was introduced in India in the year 1884 by the Director General of Post Offices then to provide life insurance coverage for postal employees. The scheme gradually extended coverage to employees of the telegraph department and female employees of the posts and telegraph department too. It is the oldest life insurance company in the country backed by the government.

The maximum sum assured at the time when the scheme was established was Rs.4,000 and is currently at Rs.10 lakh. The postal life insurance scheme now covers employees of the following departments:

• Central Government
• State Government
• Reserve Bank of India
• Nationalised banks
• Financial institutions
• Government-aided educational institutions
• Defence services
• Local bodies
• Para military forces
• Public sector undertaking
• Autonomous bodies
• Extra departmental agents of the department of posts

Postal life insurance policies not only provide death and maturity benefits but offer bonuses too. The bonus amount is provided to the nominee with the death benefit in case the life assured passes away, or is given to the policyholder along with the maturity benefit in the event he survives the policy term. The bonuses accumulate over a period of time.

Terms for bonuses payable on postal life insurance

• Bonuses will not be applicable if a policyholder borrows a loan from the policy within the first 5 years of the policy term.
• Proportionate bonuses are provided on the reduced sum assured if a policyholder borrows a loan from the policy after the completion of the first 5 years of the policy term.

Below are the details of the bonuses payable along with the benefits under each of the postal life insurance plan types:

1. Whole Life Assurance (Suraksha)

This is an insurance policy that offers a death benefit to the nominee or legal heir on the death of the life assured. A maturity benefit is provided if the individual survives up to the date of maturity of the policy. The bonus rate for the Whole Life Assurance policy was first declared for fiscal year 1952-53. The bonus rate started off at 16% and steadily increased over the years. It hit an all-time high of 96% in the FY 1998-99. The rate decreased to 90% in the FY 2002-03 and further decreased to 85% in the FY 2009-10. As of March 2014, the bonus rate has remained 85%.

2. Endowment Assurance (Santosh)

This plan promises to pay a maturity benefit to the policyholder on maturity of the policy. However, if the individual expires during the term of the policy, a death benefit is provided to the beneficiary of the policy. Accrued bonuses are provided with the benefits. The bonus rate for the Endowment Assurance plan was first announced for FY 1967-68. The initial rate was 22% which gradually increased to 25%, 31%, 42%, 54%, 67%, 72% and finally 77%, with 77% being the highest and declared for FY 1998-99. The bonus rate for the policy then slightly reduced and is at 58% as of March 2014.

3. Convertible Whole Life Assurance (Suvidha)

This plan is essentially a Whole Life Assurance plan that can be converted to an Endowment Assurance plan after completion of 5 policy years. If, however, the plan is not converted, the policy will continue as a Whole Life Assurance plan. The bonus rate was first declared for the Convertible Whole Life Assurance plan in the FY 1967-68 too. The bonus rate, which was 28% at the initial stage, saw a gradual increase every few years and reached 96% in the FY 1998-99. The bonus rate then dipped by a fine margin and is at 85% as of March 2014.

4. Anticipated Endowment Assurance (Sumangal)

This is a money back policy that is available for a 15-year term and a 20-year term. The plan provides periodic payouts at regular intervals. In case the life assured passes away during the policy tenure, a death benefit is payable to the nominee or the legal heir. The bonus rate for the Anticipated Endowment Assurance policy, too, was disclosed for FY 1967-68. The rate moderately increased on a regular basis and reached the highest rate of 77% in the FY 1998-99. As of March 2014, the bonus rate for the plan is 53%.

5. Joint Life Assurance (Yugal Suraksha)

This plan covers a couple where one of the spouses is eligible for the postal life insurance policy. The plan covers both the individuals for the sum assured amount chosen. The features of the plan are the same as an endowment policy. The bonus rate for the Joint Life Assurance plan was first made known for FY 1994-95. The rate was 76% then. The reduction in the rates was minimal with not many changes for a signification period of time. The rate as of March 2014 is 58%.

Tabular representation of bonus rates of each of the above-mentioned plan types as of March 2014: