Archive · 18 Aug 2026
Participating life insurance bonuses: How surplus is shared with policyholders
A participating life insurance plan is like a savings club with an insurance company.
When the company makes extra money, it shares some with you as a bonus.
The company must give at least 90% of the extra profit to policyholders.
There are different kinds of bonuses.
Some are added to your policy every year, some are paid at the end, and some are paid during the policy.
The bonus amount can change from year to year.
It depends on how well the company invests and manages its money.
So bonuses are not guaranteed, and you should check the company's history before buying.
Participating life insurance plans share the insurer's surplus with policyholders, unlike non-par plans that offer fixed, guaranteed benefits.
Under IRDAI regulations, at least 90% of the actuarial surplus must be distributed to participating policyholders, with no more than 10% going to shareholders.
Three bonus structures exist: reversionary bonuses added annually, terminal bonuses at maturity or death claim, and cash bonuses paid during the policy term.
Bonus rates are not guaranteed and depend on investment performance, mortality experience, expense management, persistency, and tax experience.
A ₹10 lakh, 20-year participating endowment policy with a 5% annual reversionary bonus and a ₹1.5 lakh terminal bonus would mature at ₹21.5 lakh.
- Who
- Policyholders of participating life insurance plans and insurance expert Yadav
- What
- An explanation of how bonuses and surplus distribution work in participating life insurance plans
- When
- Not specified; bonuses are determined through annual actuarial valuations
- Where
- India, under IRDAI regulations
- Why
- To help policyholders understand how participating plans share insurer surplus and how bonus rates are determined
- Minimum surplus to policyholders
- 90% of actuarial surplus
- Maximum surplus to shareholders
- 10% of actuarial surplus
- Regulator
- IRDAI
- Bonus types
- Reversionary, terminal, and cash bonuses
- Example policy
- ₹10 lakh endowment, 20-year term
- Example bonus rate
- 5% simple reversionary bonus annually
- Example maturity value
- ₹21.5 lakh (with ₹1.5 lakh terminal bonus)