Assuming bonuses are paid out every year at a rate of 5 per cent, the sum available on maturity works out to Rs 50,000 (Rs 5,000 per year into 10 years). The assumption here is that the bonus paid is a constant over the tenure of the policy, which need not be the case.

Also, the bonus paid out is cumulated over the term of the policy by a simple addition of the payouts every year.

If the example mentioned above is considered, then the bonus benefit at the end of 10 years will be Rs 62,890.

To illustrate, if one were to pay a premium of Rs 10,000 per year on a policy, the bonus (computed at 5 per cent) will amount to Rs 500 per year, which then gets cumulated over the tenure of the policy at progressively higher interest rates.

Linked as they are to market performance, such bonuses would depend on the returns generated on the market investments made by the insurancecompany.

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