Life insurance corporation (LIC), is one name that has established its name with their unique products and services in the market. LIC offers number of insurance and pension plans to its customers with different features and benefits like LIC Jeevan Arogya, LIC Jeevan Vriddhi, LIC Jeevan Amrit, LIC Jeevan Tarang, LIC Jeevan Anand and many more. These plans has attracted many people in India which is the reason eight out of ten people hold LIC policies. But most of the policyholders do not understand the key terms of the policies which can help them understand How these policies works for them.
To keep your financial life secure it is very important for every customer to understand insurance product in detail before planning to buy the same. Same applies for LIC policies, while reading details of the product you will come across many term like LIC Bonus, LIC Premium, Loyalty Additions etc. So lets have a look at all these aspects to make you understand any LIC Product better.
LIC Money Back Plans
LIC offers some money back insurance plans where policyholder get maturity benefits periodically during the term of the plan. In other words, unlike other endowment plans in which policyholder get returns only at the end of maturity period, LIC also offers some insurance policies where policyholder gets partial survival benefit in specified intervals. Like in case of 20 years money back policy, policyholder get 20% of sum assured in every 5 years (5 years –20%, 10 years- 20%, 15 years- 20%) and rest 40% on maturity with bonus. Most importantly this plan offers full sum assured on death of policyholder without deducting any of the survival benefit amount paid. But premium for these plans are higher than other plans.
LIC Offers Following Money Back Plans
- The Money Back Policy – 20/ 25 Years
- Jeevan Surabhi – 15/ 20/ 25 Years
- Bima Bachat
- Jeevan Bharati – I (For Women’s)
- Komal Jeevan (For Children’s’)
Non-Money Back Plans
Some of the LIC policies do not make payments periodically but pays at the end of the policy period. This kind of plans are popular as endowment plans, LIC offers normal endowment plans name Jeevan Anand, Jeevan Tarang etc.
Different Types Of LIC Bonus
LIC offers bonuses with various products which is paid on either on maturity of the policy or on death of the policyholder whichever is earlier. But most of the policyholders do not ever try to understand the type of bonus available on their policy and how the same will be calculated.
What Is Simple Reversionary Bonus In LIC Policy?
In case of LIC policies, bonus means ‘Simple Reversionary Bonus’. LIC declares this bonus annually at financial year end on per thousand of the sum assured. Which means if you hold a policy of Rs 5 lakh sum assured and the bonus for this year is Rs 50 per thousand sum assured then the amount of bonus on your policy will be Rs 25000 for this year.
As bonuses are paid at the end of the policy, if you surrender your policy then you will not get the actual accrued bonus. Calculation of bonus amount is based on future value as it is supposed to paid in future. So in case of surrendering policy you will get reduced amount of bonus only when you have completed atleast 5 years else you won’t get any bonus.
What Is Final Additional Bonus (FAB) In LIC Policy?
Final Additional Bonus (FAB) is another bonus of LIC policies which is offered to only long duration policies i.e 15 years or more. This bonus is generally not paid for policies which have “Guaranteed Additions”.
What Is Loyalty Additions In LIC Policy?
As name suggest ‘Loyalty Addition’ is a bonus for being loyal to LIC. The declaration of this bonus depends upon the performance of the company in long run. In most cases company declares this bonus at the end of the policy but now some policies even get this bonus after completion of 5 or 10 years like Jeevan Saral policy. It is declared per thousand of sum assured. Loyalty additions are totally non-guaranteed.
What Is Guaranteed Additions In LIC Policy?
Guaranteed Additions as name suggest is a guaranteed amount paid by the company at specified intervals or at end or start of some event along with the sum assured at the end of the policy. As in case of Jeevan Shree-I , policyholders get Rs 50 per thousand sum assured at the end of each financial year for first five years of the policy. This amount of bonus are payable along with the basic sum assured payable on claim.
Today everybody is known to the term ‘Surrender Value’, for those who don’t know – surrender value is the sum paid by the company to the policyholder on exiting the policy before maturity. In most cases, when policyholder exits from policy before maturity, the amount paid by the company comes like peanuts or in some cases nothing comes back. It is always better for every person to have a close look at the terms and conditions of the policy before investing money. In general scenario – surrendering insurance policies works like:-
- If you surrender your policy before payment of 3rd year premium – You wont get anything back.
- If you surrender your policy after payment of 3rd year premium – You will get some money back i.e a fraction of the premiums paid by you after deduction of 1st year premium. For Example – The sum assured of your policy is 5 lakhs for which you pay annual premium of Rs 25,000. If you surrender your policy after paying 5th year premium (Rs 25000 *5 = Rs 1,25,000) then you will get amount in the range of Rs 30,000 – Rs 40,000 i.e around 30 to 40% of the the 4 premiums paid by you + reduced amount of accrued bonus (as you have completed 5 years).
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Paid Up Policy
After paying premium for 3 continuous years, if you do not want to pay further premiums then in that case rather then surrendering your policy you can also make your policy paid-up i,e stop paying premiums. In this case at the end of the policy period, policyholder gets the amount of premiums paid by him along the accrued bonus.
Mortality Charges In LIC Life Policy/Premium
The premium that you pay for your insurance policy includes some charges like administration charges, commissions, mortality charges etc. ‘Mortality’ means death, so the charges paid by an insured in the name of mortality is the actual cost of insurance of a life policy. In simple words, mortality charges refers to that part of the total premium which provides death benefit to the insured. The sum assured of a life insurance depends upon the mortality charges paid by the insured.
Insurance companies determines mortality charges based on certain factors i.e the amount of risk under the policy, the risk classification of the policy holder, and age of the policy holder.
Loan On LIC Policy
Loan facility is also available on LIC policies, where insured can avail loan amount upto 90% of the surrender value of the policy (85% for paid up policies) including cash bonus.. The rate of interest charged on these loans is at 9% half yearly.
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