Definition
Bonus Disclosure (Benefit Illustration)
A benefit illustration is an IRDAI-mandated document showing projected policy values at standardised assumed rates so buyers can compare plans realistically.
For ULIPs and savings plans, insurers must give a benefit illustration projecting fund or maturity values at two prescribed gross return assumptions (currently 4% and 8% for ULIPs), net of all charges, so buyers see how fees erode returns and avoid being misled by optimistic single-figure projections.
For participating plans, illustrations separate guaranteed benefits from non-guaranteed bonuses, with a clear caveat that bonuses are not assured. Reading the illustration, especially the reduction in yield and the split of guaranteed versus non-guaranteed, is one of the most useful safeguards against mis-selling.
Related terms
- Terminal BonusA terminal bonus is a one-time, non-guaranteed bonus paid at maturity or on a death claim of a long-running participating policy, on top of reversionary bonuses.
- Fund Management Charge (FMC)The fund management charge is an annual percentage fee deducted from a ULIP's fund value for managing the underlying investment funds.
- Internal Rate of Return (Insurance)In insurance, the internal rate of return is the effective annualised yield of a savings or guaranteed plan after accounting for all premiums and payouts over time.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.