LIC Single Premium Insurance Plan Benefits

A striking aspect of the Covid-19 pandemic is that it showcased the importance of life insurance. Perhaps never before has it been more imperative to have insurance to meet medical expenses and secure one’s finances and loved ones. In India, the Life Insurance Corporation of India, or LIC, has been the most trusted organisation for life insurance since its launch in 1956. It is no wonder that people turn to the institution for their life insurance needs to date. 

The LIC Single Premium Endowment Plan was launched on the 1st of February 2020. But perhaps you still question why you should purchase life insurance if you already have other investments. Do you really need life insurance if you invest in stocks, shares, and mutual funds? The short answer is, yes. Read on to find out the benefits of investing in this life insurance plan.

More about the LIC Single Premium Endowment Plan

It is a single premium plan and is a non-linked, participating endowment life insurance policy. If you are not sure what all those words entail, that’s ok. Here is a breakdown of all the terms mentioned:

1. Single Premium
   This means that the policyholder pays only one premium as a lump sum amount at the start of the policy period. They will receive coverage for the specified policy period.
2. Non-linked
   This means that the plan is not linked to the stock market. Hence, it is not swayed by market fluctuations and provides low-risk returns. The plan will also provide well-defined maturity benefit amounts.
3. Participating
   This is an insurance plan that offers dividends to its policyholders. These dividends may be provided on an annual basis. Dividends are typically generated from the insurance company’s profits, in this case, LIC’s profits.
4. Endowment
   An endowment policy provides the policyholder with a maturity benefit pay-out if the policyholder survives the coverage period. This singular feature differentiates endowment plans from basic term insurance plans that only offer a death benefit to the policyholder’s beneficiaries. There is no pay-out if the policyholder survives the maturity period. When planned carefully, endowment plans help meet future financial needs, such as paying for a child’s higher education or buying a new house.

Why should you buy it?

1. A single premium plan – 
   These plans require a one-time lump sum investment. For example, you may have received surplus cash say in the form of a salary bonus. Or you received a cash gift from a relative during your wedding. Don’t let this surplus amount lie in your bank account or waste it on trivial items. Instead, put it to good use by investing in a single premium plan. This plan is also useful for individuals who cannot confidently commit to recurring premium payments. Suppose you are launching a start-up business of your own. It could take a while for the business to generate profits. Your monthly income could ebb and flow. In this case, a single premium plan is ideal for you.
2. A non-linked plan - 
   A key aspect of successful financial investing is to know your risk appetite. Not everyone can bear high-risk investments. Perhaps you are risk-averse. Or you are already invested in high-risk instruments and want to invest in a low-risk investment vehicle. These plans provide a buffer from market volatility. Your funds are therefore secure and your return on investment assured.
3. A participating plan - 
   Everyone likes receiving cash bonuses. You work hard and may receive a cash bonus from your employer as appreciation and as part of the company’s profits. In a similar vein, your insurance company garners profits and distributes those profits to policyholders in the form of dividends. Thus, you as a policyholder are participating in the insurance company’s profits.
4. An endowment plan - 
   These plans provide life insurance coverage as well as act as a form of savings for the policyholder. While providing for your family’s security is important, you may also want to receive a cash benefit for your investment; this where an endowment plan comes in. You should purchase this plan for the following reasons
5. You wish to secure your loved one’s financial future in case of your untimely demise
6. You intend to save money for a future goal in mind
7. You want to build a corpus for fulfilling a long-term investment objective

Benefits of the LIC Single Premium Endowment Plan

1. Maturity Benefit
   When you purchase the LIC Single Premium Endowment Plan, you will have to set a fixed sum assured amount. At the time of maturity of the plan, so long as the policyholder has survived the coverage, they will receive the sum of the following:
   1. The sum assured amount as Maturity Benefit
   2. Simple reversionary bonuses –
      These are calculated on the sum assured amount and are declared annually. This type of bonus is accrued and paid out at the time of plan maturity. An example: Suppose the simple reversionary bonus is INR 70 per INR 1000 for a life insurance policy with a sum assured amount of INR 1 lakh. In this case, the annual bonus will be INR 7000. If the policy term is 10 years, the simple reversionary bonus will be INR 70,000.
   3. Final additional bonus – 
      This is a one-time additional bonus that is paid by the insurance provider along with the simple reversionary bonus.

Death Benefit

In case the insured person passes away during the coverage period then the beneficiary will receive the sum of the following: 

1. The sum assured amount 
2. Simple reversionary bonuses – 
   These are calculated on the sum assured amount and are declared annually. This type of bonus is accrued and paid out at the time of plan maturity.
3. Final additional bonus – 
   This is a one-time additional bonus that is paid by the insurance provider along with the simple reversionary bonus.

The above amount is applicable if the death of the insured person occurs after the date of the commencement of risk. However, if the death occurs before the date of commencement of risk then the beneficiary will only receive the sum assured amount and nothing else.

Flexible settlement options

You can choose to receive the Maturity Benefit or the Death Benefit as a lump sum amount or in instalments. The instalments would be paid over five, 10, or 15 years. You can choose to receive either the full Maturity Benefit amount or a part of it in instalments. Moreover, you can choose to receive either an absolute value in instalments or a percentage of the total amount payable. Similarly, you can opt for your beneficiary to receive the full Death Benefit amount or a part of it in instalments. Again, the amount can be an absolute value or a percentage of the total amount payable.

Furthermore, the instalments can be received in advance in annual, semi-annual, quarterly, or monthly intervals. There is a minimum instalment amount for the different interval modes, as can be seen in the table below

Maximum sum assured

You can choose as high a sum assured amount as you wish as there is no maximum limit.

Loan benefit

Are you in need of emergency funds? No need to worry. The policyholder can avail of a loan under this policy after the completion of the first policy year. The loan amount available will be equal to 90% of the surrender value as of the date that the loan is sanctioned. 

Riders available

By paying a slightly higher premium you can receive the benefits of the following two riders

LIC’s Accidental Death and Disability Benefit Rider: 

In case of the accidental death of the insured person, the insurance company will pay an Accident Benefit Rider Sum Assured as a lump sum amount to the beneficiary. If it is an accidental disability, then an amount equal to the Accident Benefit Rider Sum Assured is paid in equal monthly instalments over 10 years.

LIC’s New Term Assurance Rider: 

With this rider, the beneficiary receives an amount equal to the Term Assurance Rider upon the death of the insured person.

Tax Benefits

Life insurance is a valuable tax-saving investment. Here are the tax benefits under this policy:

• Under Section 80C, the policyholder can claim a tax deduction of up to INR 1.5 lakh on premium payments
• Under Section 10(10D), the beneficiary can receive a tax benefit on the sum assured received by them. The entire amount received is tax-exempt.

Eligibility criteria for the LIC Single Premium Endowment Plan

The bottom line

Many investment options can help generate wealth quickly. But these options are often high-risk in nature. In these days of market volatility and uncertainty, it pays to have an assured investment option. So, invest in the LIC Single Premium Endowment Plan. Protect your loved ones while you save money and plan for your future finances.