LIC of India is the largest Insurance house in the country, and keeping in line with their size, they offer a plethora of different policies. Let’s have a look at the different types of policies offered by LIC. This will help you in making decision about which LIC policy would best suit your needs.
LIC offers group as well as individual plans. Here we are looking at individual plans only. Under the individual plans section LIC offers policies under 3 different categories. These are as under:
In this article we will take a closer look at these 3 categories and understand which category is most suitable for your requirements.
An endowment plan is a life insurance contract designed to pay a lump sum after a specified term. This term can range from 5- 20 years or can be age linked as well.
Such plans offer:
- Life insurance that is in case of death of the policy holder during the term of the policy, LIC will make a lump sum payment to the person nominated on the policy. This will provide financial support to the surviving members of the deceased.
- If the policy achieves its full term without any eventuality to the policy holder, then LIC will payout a certain lump sum amount to the policy holder. This is called survival benefit.
- Some policies also pay out in the case of critical illness or severe disability.
- Also LIC offers loan facility against some of its Endowment plans
Who is this for?
In endowment plan the survival benefits are payable only at the end of the endowment period. Such plans are suitable for those individuals whose first priority is life insurance cover for themselves of their family.
Money Back Plans:
A Money Back plan is modified version of the Endowment plan. Under this the plan holder gets benefit of the life insurance cover, and also receives some of the survival benefits at regular intervals during the policy term.
Such plans offer:
- Life insurance that is in case of death of the policy holder during the term of the policy, LIC will make a lumpsum payment to the person nominated on the policy. This will provide financial support to the surviving members of the deceased.
- The plans also provide for periodic payments of partial survival benefits during the term of the policy, so long as the policy holder is alive.
- If additional premium is paid, LIC also offers disability rider wherein in case of permanent disability to the policy holder during the term of the policy LIC will payout additional sum the policy holder spread out over a period of time, in order to aid the policy holder financially in his time of need.
Who is this for?
A money back plan is a worthwhile investment for those individuals who are looking for a life insurance cover which also provides regular income support to them. Payout of the survival benefit under this plan at regular intervals can be utilized by policy holders to plan their financial requirements that might coincide with the payout schedules.
For e.g: Under a 20 year Money Back policy, 20% of the sum assured becomes payable after 5 years of the policy purchase date. After 10 years another 20% of the sum assured becomes payable. and so on. In this case, If a policy holder is expecting some major expense in form of children’s education, purchase of new home etc, he/she can plan these expense to coincide with the payout timing and use the funds appropriately.
Term Assurance Plan:
This is the simplest and the purest form of life insurance plan. Under this plan, the plan holder needs to pay certain fixed amount of premium at regular interval, until the term of the plan ends. In case of demise of the plan holder before the end of the plan term, the nominee will receive the amount of coverage taken under the policy. However an important point in these plans is that if the plan holder survives until the end of the term plan, no maturity/survival benefit is payable to him/her and the entire premium paid by the plan holder is lost.
Such plan offer:
- Highest Insurance cover at lowest premium
- It is Insurance cover in its purest form, and caters to the need for protection by ensuring financial support to the surviving family members in case of demise of the plan holder during the policy term.
- Term insurance are usually for the duration of 10, 15, 20, 25, 30 years.
- Premiums paid qualify for deduction under section 80C
Who is this for?
A Term Insurance plan is insurance at its purest form, and this makes sense only for those individuals who are looking for protection only. As this plan offers no savings in form of survival/maturity benefit. For those individuals who are in high risk jobs and would not like to fork out higher premium for a life cover Term insurance plans are best. However in case you are looking to attain dual goals of savings as well as insurance cover then opt for Endowment or Money Back plans only.
Still have problem choosing which type of plan will suit you best? Write in to us with your questions and we will help you out with your decision making.