Updated on October 4, 2023
A Vesting Bonus, often referred to as a “Reversionary Bonus,” is a financial benefit provided by an insurance company to policyholders. This bonus is typically declared and added to the sum assured under a policy, primarily in the context of participating life insurance policies, such as traditional endowment and money-back policies.
Significance of Vesting Bonus
Vesting Bonuses play a significant role just like life insurance is a crucial financial planning tool Vesting Bonuses play a significant role. They incentivize individuals to invest in long-term life insurance policies by enhancing the policy’s maturity value. Policyholders can use this accumulated bonus as a source of additional financial security or to meet specific financial goals, such as funding their child’s education or planning for retirement.
What are the key aspects of vesting bonuses?
Vesting Bonuses are declared by insurance companies based on their financial performance, including assets and liabilities, often on an annual basis. These bonuses are commonly associated with participating life insurance policies, where policyholders share in the profits generated by the insurer’s life insurance business. When a Vesting Bonus is declared, it is added to the policy’s sum assured, increasing the total payout upon certain events like maturity or death during the policy term. The Vesting Bonus accumulates over time as the policy remains active, progressively enhancing the policy’s overall value. Some policies may offer guaranteed bonuses, predetermined by the insurer, while others feature non-guaranteed bonuses dependent on the insurer’s financial performance.