Updated on October 4, 2023
The term loyalty additions and its implications in insurance are given below.
Meaning of Loyalty Additions
Loyalty Additions, also known as Loyalty Bonuses, are benefits that some life insurance policies offer to policyholders who maintain their policies over an extended period and fulfill certain conditions. These additions are essentially rewards provided by the insurance company to encourage policyholders to stay committed to their insurance plans. Loyalty additions are typically paid out in addition to the basic sum assured or the accumulated fund value upon the policy’s maturity or the death of the policyholder.
What is the Purpose of loyalty additions and eligibility to claim the same?
The purpose of Loyalty Additions is explained below.
The primary purpose of loyalty additions is to incentivize long-term policyholders to remain loyal to the insurance company. Insurance companies benefit from policyholders who continue their policies for extended durations as it helps stabilize their business, increase persistency rates, and reduce the cost of acquiring new customers. In return for this loyalty, policyholders receive an additional financial reward in the form of loyalty additions.
Eligibility and Conditions for Loyalty Addition –
Loyalty additions are not a guaranteed feature in all insurance policies and can vary from one insurer to another. Policyholders must meet specific criteria and conditions to become eligible for loyalty additions, which may include:
Maintaining the policy for a minimum specified number of years (e.g., 10, 15, or 20 years).
Paying premiums regularly without any lapses.
Not withdrawing funds or surrendering the policy before maturity.
Policyholders may also need to maintain a certain level of sum assured or premium payment to qualify.