The Life Insurance Corporation of India (LIC) is one of India’s most trusted life insurance companies, providing various life insurance policies that cater to the diverse needs of its customers. LIC policies cover an array of insurance and financial goals, from safeguarding life to savings, investment, retirement planning, and more. Let’s delve into the details of LIC’s policies, types, benefits, eligibility, and key considerations, which will provide a comprehensive overview of LIC’s offerings.
- Types of LIC Policies
LIC offers different types of policies, each designed to fulfill specific financial needs. Here are the main categories:
a) Endowment Policies
Endowment policies combine life insurance with savings. In case the policyholder survives the policy term, the maturity benefit, along with any bonuses accrued, is paid out. If the policyholder dies during the policy period, the death benefit is paid to the nominee.
Popular Plans:
LIC New Endowment Plan
LIC Jeevan Labh
LIC Jeevan Umang
b) Term Insurance Policies
Term insurance provides pure risk cover. In case of the policyholder’s death during the term, a death benefit is paid to the nominee. These policies typically do not have a maturity benefit, making them more affordable.
Popular Plans:
LIC Tech Term Plan
LIC Jeevan Amar
c) Money Back Policies
Money-back policies offer periodic payouts during the policy term. These payouts, known as survival benefits, provide liquidity at regular intervals. Upon maturity, any remaining sum assured is paid along with bonuses. In case of the policyholder’s death, the full sum assured is paid to the nominee, irrespective of survival benefits already paid.
Popular Plans:
LIC New Money Back Plan
LIC Bima Shree
d) Whole Life Policies
Whole life policies cover the policyholder for their entire life or up to a specified age, typically 100 years. The nominee receives the death benefit whenever the policyholder passes away. Some whole-life policies also offer survival benefits and bonuses if the policyholder reaches a specified age.
Popular Plans:
LIC Jeevan Umang (Whole Life with Limited Premium Payment)
e) Pension and Annuity Plans
These plans focus on retirement income. Policyholders pay premiums during their working years and, upon maturity, receive a regular pension. Annuity plans offer a steady income post-retirement, allowing the policyholder to manage financial needs in their golden years.
Popular Plans:
LIC Jeevan Akshay VII
LIC New Jeevan Nidhi
f) Unit Linked Insurance Plans (ULIPs)
ULIPs offer life insurance protection combined with investment options. Part of the premium goes towards life cover, while the rest is invested in equities or bonds, depending on the policyholder’s choice. ULIPs involve higher risk but can offer substantial returns.
Popular Plans:
LIC New Endowment Plus
- Key Features and Benefits of LIC Policies
a) Death Benefit
The primary benefit of an LIC policy is the death benefit. If the policyholder dies during the policy term, the nominee receives a death payout, which can secure the family financially in the absence of the breadwinner.
b) Maturity Benefit
Many LIC policies, especially endowment and money-back plans, offer maturity benefits. This is the payout the policyholder receives upon surviving the policy term. In addition to the sum assured, policyholders may receive accumulated bonuses.
c) Bonus
LIC regularly declares bonuses, which are added to eligible policies, enhancing their value over time. Bonuses are typically given as a percentage of the sum assured and are paid upon policy maturity or the policyholder’s death.
d) Loans Against Policies
Policyholders can avail of loans against certain LIC policies. The policy serves as collateral, and the loan amount is typically a percentage of the policy’s surrender value. This option is useful for meeting emergency financial needs without breaking the policy.
e) Tax Benefits
LIC policyholders can claim tax deductions on the premium payments under Section 80C of the Income Tax Act. Additionally, the death benefit and maturity proceeds are generally tax-exempt under Section 10(10D), subject to certain conditions.
f) Flexibility in Premium Payment
LIC offers various premium payment options, including monthly, quarterly, half-yearly, and annual modes. Some plans also have a single premium payment option, which can be convenient for policyholders who prefer one-time payments.
g) High Claim Settlement Ratio
LIC has a reputation for a high claim settlement ratio, providing assurance to policyholders and their families that claims are likely to be honored without complications.
- Eligibility Criteria and Premiums
Each LIC policy has specific eligibility criteria concerning the minimum and maximum age at entry, policy term, and premium payment term. The premium amount for LIC policies varies based on factors such as:
Sum Assured: Higher sum assured requires a higher premium.
Policy Term: Longer policy terms generally involve a higher premium.
Policyholder’s Age: Younger policyholders pay lower premiums, while older individuals may face higher premiums.
Health Condition: LIC policies often require medical exams to assess health risk, which can impact premium amounts.
- Popular LIC Policies in Detail
Here’s a look at some of LIC’s most popular policies and their features:
a) LIC Jeevan Amar (Term Plan)
Type: Term insurance.
Features: Provides pure life cover; customizable options with increasing cover; low premiums.
Benefits: Death benefit to nominee; high cover at affordable rates; policy term flexibility.
Eligibility: 18-65 years; term: 10-40 years.
b) LIC New Endowment Plan
Type: Endowment policy.
Features: Combines life cover and savings; guaranteed maturity benefits plus bonuses.
Benefits: Maturity benefit, death benefit, loan facility, and tax benefits.
Eligibility: 8-55 years; policy term: 12-35 years.
c) LIC Jeevan Akshay VII (Annuity Plan)
Type: Pension plan.
Features: Single premium plan with lifetime annuity options.
Benefits: Guaranteed lifetime income; options for different annuity types; covers retirement income.
Eligibility: 30-85 years; policy term: lifetime.
d) LIC Bima Jyoti
Type: Non-linked, non-participating, savings plan.
Features: Fixed additions of Rs. 50 per Rs. 1,000 sum assured every policy year.
Benefits: Maturity benefits and guaranteed additions; tax savings.
Eligibility: 90 days-60 years; policy term: 15-20 years.
- How to Choose the Right LIC Policy
Selecting the right LIC policy requires understanding one’s financial goals, risk tolerance, and time horizon. Here are some tips to choose effectively:
Assess Financial Goals: Determine if the goal is pure protection (term plan), savings with life cover (endowment), periodic liquidity (money-back), or retirement income (annuity/pension).
Understand Risk Appetite: ULIPs involve market risks, while traditional endowment and whole-life plans offer more stable returns.
Policy Term and Premium Affordability: Ensure that premiums are affordable throughout the policy term to prevent lapses. Shorter terms might result in higher premiums.
Consider Age and Family Needs: Younger individuals with families may benefit from high-cover term plans, while those nearing retirement may focus on pension plans.
- Key Considerations and Limitations
While LIC policies offer a range of benefits, it’s essential to consider some factors before investing:
Low Returns on Some Plans: Traditional LIC plans, such as endowment and money-back policies, may offer lower returns compared to mutual funds or other investments.
Surrender Value: Policies often have low surrender values in the initial years, which means policyholders may lose a portion of their investment if they surrender early.
Market Risk in ULIPs: ULIPs are linked to market performance, so they carry a higher risk compared to other LIC policies.
Conclusion
LIC offers a variety of life insurance and investment products designed to cater to different financial needs. Each type of policy serves a unique purpose, from providing life cover to creating retirement funds or offering liquidity at regular intervals. When choosing an LIC policy, it’s crucial to match your financial objectives, risk tolerance, and budget with the specific policy features. Whether seeking comprehensive life cover, disciplined savings, or retirement planning, LIC policies offer a trusted avenue to meet diverse financial goals in a structured manner. Always review the policy’s terms, consult with an LIC agent if necessary, and ensure alignment with your long-term financial plan.
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