Insurance companies have to offer a variety of plans and policies that are suitable for the insured. Life Insurance Corporation, popularly known as LIC, is known for its LIC endowment plans, a form of life insurance and investment plan.
While other private insurance companies focus on other forms of insurance policies, most of the policies offered by LIC are premium endowment plans. Here are some things to keep in mind when investing or purchasing an LIC endowment plan.
What is an endowment policy?
The question that needs to be addressed is what is meant by an LIC endowment plan. Simply put, an endowment policy is a combination of investment and insurance, much like ULIPs (Linked Unit Insurance Plans). However, endowment plans offer guaranteed returns, while ULIPs offer market-based returns.
The policyholder’s life is insured for a pre-agreed period of time and the coverage is called the sum insured. The policyholder pays a premium of which a portion is used to cover business expenses, while the rest of the amount is invested in the policyholder’s account.
There are two types of premium endowment plans: for-profit and non-profit. There are several options that policyholders can choose from, such as an annuity, children’s education, or a retirement plan.
What are the key features of the LIC Endowment Plan?
The USP of LIC’s new endowment plan is that it has the dual purpose of guaranteeing the policyholder’s life and investment at the same time. This combination is useful in the event of the policyholder’s death, as the family will be entitled to a lump sum when the policy expires.
One of the main concerns family members of a deceased policyholder have is a cash flow problem. However, this endowment and investment plan provides a loan facility to solve this problem.
Endowment plans help salaried people save systematically and ensure financial security. Also, the LIC endowment plan is an excellent option for those who do not like to take risks, as it is a safe plan to opt for.
What are the advantages offered by endowment plans?
Some of the main advantages of investing in endowment plans include:
• Long term insurance
• Safe and risk-free option
• Systematic savings
• Guaranteed bonuses
• Superior flexibility
• Double tax benefit
Another advantage is that additional clauses can be added to the policy such as disability and accident benefits. Under this rider, an additional benefit is added to the policy that will insure the policy holder in case of accidental death due to the accident.
In the event that the policyholder becomes disabled, as part of the rider, a payment plan will be executed based on the agreed terms. Please note that these riders are eligible for discounts based on a higher premium of the purchased policy.
What are the benefits offered under the LIC Endowment Plan?
The various benefits that extend under the premium endowment and the investment options offered by LIC include:
• Death benefit
• Maturity benefit
• Profit sharing
In the event of the death of the policyholder, during the term of the policy, provided all premiums are paid, the death benefit will be paid. However, it should be noted that the benefit should not be less than 105% of the premiums paid.
The basic amount with review bonuses and additional bonuses, if any, and a lump sum will be paid to the policyholder at the time of maturity. However, these payments will be made if all premiums have been paid.
Bonuses may be declared for a policy when the results of the policy claim are established either by expiration or death of the policyholder. However, this is subject to the provision that the policy must meet a minimum term as set out in the policy document signed and approved by both the insurer and the policyholder.
Are there any tax benefits available by investing in a premium endowment policy?
Yes, policyholders who invest in endowment plans receive tax benefits. Insureds can claim the section 80 C benefit on top of the premium paid and under section 10 D instead of the death benefit.
The dual incentive in the form of tax relief encourages people to invest in long-term plans that are beneficial to policyholders.
What factors should be considered when selecting the LIC endowment plan?
When selecting an endowment plan, the policyholder’s current life stage, income, investments, long-term financial goals, number of dependents, and individual needs should be considered. In addition, the premium rates offered by the insurer, bonus payment history, reputation, financial condition, claims and settlement ratio, and financial condition must all be taken into account.
Select a plan that is easy to understand, simple, and has terms you are comfortable with. Avoid selecting a complex policy and read the insurance document carefully before signing on the dotted line.
The LIC Endowment Plan is a safe and reliable investment that you will never regret. Investing in a policy like this can help ensure financial security and is a great option to fall back on in times of emergency.