Identify the correct statement

Bonus is not allowed on surrender of a policy
In compound reversionary bonus it is a percentage of basic benefit and already attached bonus
Terminal bonus and compound bonus are one and the same
Persistence bonus is allowed by the insurer at its discretion in certain cases

The correct answer is: D. Persistence bonus is allowed by the insurer at its discretion in certain cases.

A bonus is a payment made by an insurance company to a policyholder in addition to the basic benefit of the policy. Bonuses are typically paid out annually, and they can be either guaranteed or non-guaranteed. Guaranteed bonuses are paid out regardless of the performance of the insurance company’s investments, while non-guaranteed bonuses are paid out only if the insurance company’s investments perform well.

Persistence bonuses are a type of non-guaranteed bonus that is paid to policyholders who have maintained their policy for a certain number of years. The amount of the persistence bonus is typically based on the policyholder’s age, the type of policy they have, and the length of time they have had the policy.

Persistence bonuses are allowed by the insurer at its discretion in certain cases. For example, an insurer may offer a persistence bonus to policyholders who have been with the company for a long time or who have a high-value policy. The insurer may also offer a persistence bonus to policyholders who renew their policy at a higher level of coverage.

The other options are incorrect because:

  • Option A is incorrect because bonuses are typically allowed on surrender of a policy, although the amount of the bonus may be reduced.
  • Option B is incorrect because compound reversionary bonus is a percentage of the basic benefit only, not the already attached bonus.
  • Option C is incorrect because terminal bonus and compound bonus are not one and the same. Terminal bonus is a one-time payment that is made when a policy matures or is surrendered, while compound bonus is a regular payment that is made throughout the life of the policy.