The correct answer is: A. Per thousand premium paid
Reversionary bonus is a type of bonus that is declared by an insurance company on a regular basis, usually annually. It is calculated as a percentage of the total premium paid by the policyholder over the lifetime of the policy. The bonus is then paid out to the policyholder in the form of a lump sum or as an increase in the sum insured.
Reversionary bonus is a form of deferred profit sharing, and it is designed to reward policyholders for their loyalty and for the long-term nature of their insurance contracts. It is also a way for insurance companies to share their profits with their policyholders.
The amount of reversionary bonus that is declared each year is determined by the insurance company’s board of directors. The board takes into account a number of factors, including the company’s financial performance, the level of claims, and the investment returns.
Reversionary bonus is a valuable benefit for policyholders, and it can significantly increase the value of their insurance policies. It is important to note, however, that reversionary bonus is not guaranteed. The amount of bonus that is declared each year can vary, and it is possible that no bonus will be declared at all.
Here is a brief explanation of each option:
- Option A: Per thousand premium paid. This is the correct answer. Reversionary bonus is calculated as a percentage of the total premium paid by the policyholder over the lifetime of the policy.
- Option B: Per thousand surplus of the company. This is not the correct answer. The surplus of an insurance company is its net income after all expenses have been paid. Reversionary bonus is not calculated based on the company’s surplus.
- Option C: Per hundred premium paid. This is not the correct answer. Reversionary bonus is calculated as a percentage of the total premium paid, not as a percentage of the premium paid per year.
- Option D: Per thousand sum insured. This is not the correct answer. Reversionary bonus is not calculated based on the sum insured.