LIC’s New Endowment Plan
LIC, Life Insurance Corporation of India, was founded in 1956 and is still the sole public sector company that deals with life insurance in the country. For over 63 years, this veteran company has been the most-trusted name in the field of insurance. With its headquarter in Mumbai, LIC now functions with a total of 8 zonal and 113 divisional offices.
LIC has a firm belief that different people have different needs and necessities. LIC policies, therefore, are diversified in nature and each of them offers divergent solutions to different demands. Many endowment plans have been launched by LIC, one of them being LIC’s New Endowment Plan.
A participating endowment plan, LIC’s New Endowment Plan, offers a composition of safe-keeping and saving. The basic plan offers both death as well as maturity benefit. Ideal for long-term investors, the plan is also considered to be a good option if the investor wants to follow a disciplined way of saving.
Key Features of LIC’s New Endowment Plan
LIC’s New Endowment Plan helps an individual with his long-term plans. With a protection cover he is able to keep up with the financial requirements of himself as well as his family at different stages of life. The key features of the plan are given below:
- LIC’s New Endowment Plan is a traditional, participating endowment plan.
- The minimum sum assured in LIC’s New Endowment Plan is INR 1 lakh, there isn’t any upper limit amount.
- The policy holder is required to pay the premium for as long as the policy continues.
- If the policy holder dies during the term of the policy, death benefit is received by the nominee. The policy terminates thereafter.
- In case the policy holder survives the policy, he receives maturity benefit at the end of the policy term and then the policy terminates.
- The policy holder can opt for the accidental death and disability benefit as a rider along with the vanilla policy.
- To cater to the financial needs of the policy holder there is a provision of surrender benefit as well as a loan facility, with certain terms and conditions attached to them.
- Under both conditions-death and maturity, the plan pays a simple reversionary benefit.
Eligibility Criteria for LIC’s New Endowment Plan
|Age of Entry
|INR 1 lakh
Benefits of LIC’s New Endowment Plan
Mentioned below are the benefits of LIC’s New Endowment Plan which make it a popular choice for insurance seekers.
- Death Benefit
In case of death of the insured individual during the term of the policy, the nominee would be eligible to receive the death benefit which would include the Sum Assured on death, Vested Simple Reversionary Bonuses and the Final Additional Bonus, if any.
The sum assured on death is higher of:
- Basic Sum Assured chosen at the commencement of the Plan
- 10 times more the Annualised Premium
- A minimum of 105% of all premiums paid till date
- Maturity Benefit
LIC’s New Endowment Plan allocates a Maturity Benefit to the policyholder at the end of the policy term. If the policyholder survives the plan, and has paid all the premiums constantly, he is eligible to receive the maturity benefit. The maturity benefit is the amount, that is paid in lump sum and is equal to basic sum assured + reversionary bonus.
- Participation in Corporation Profit
If the policy is in full force, depending on the experience of LIC, the policy can participate in profits and be eligible for a Simple Reversionary Bonus, at a rate that is declared by LIC. The bonuses are declared at theend of the financial year. The policyholder may also receive Final Additional Bonus depending on the year in which the policy is claimed.
- Tax Benefits
Just like other LIC Policies, the premiums paid up to INR 1.5 lakhs for LIC’s New Endowment Plan, are exempted under Section 80C. The Death Benefit and the Maturity Benefit received by the nominee and the policyholder respectively are also tax-free under the Section 10 (10D).
- Rider Benefit
The policyholder has the provision to add-on Accidental Death and Disability Benefit rider to the vanilla plan to enhance its cover and make it more extensive.
With this rider, if the insured individual dies in an accident or suffers disability, he would receive an added benefit. An accident is defined as “a sudden, unforeseen and involuntary event caused by external, violent and visible means” by LIC of India.
This benefit is optional and depends completely on the selection of the insured individual and this rider is available only adults.
- Other Benefits offered by LIC’s New Endowment Plan
Some of the other benefits that the policyholder can enjoy with the plan are as follows:
- Free-Look Period
If for some reason the policyholder is not pleased with the terms and conditions of the plan and he wishes to cancel the policy, there is provision to terminate it within the “Free-Look” period. The ‘Free-Look Period’ is a period of 15 days from the receipt of purchase. The money is refunded to his bank account, after all the formalities are done with.
- Surrender Value
The amount that is payable when the policy is surrendered by the policyholder is called the Surrender Value. If for some reasons the policyholder is not able to pay the premiums of the plan, he can surrender it and avail the Surrender Value. The policyholder is eligible to make a surrender claim only after paying the policy premium for 3 years regularly.
- Flexibility in Payment of Premium
The frequency of payment of premium depends on the choice of the policyholder. He can select any of the 4 premium paying frequencies available-annually, semi-annually, quarterly and monthly.
- Grace Period
The extended time period that is granted by the insurer from the date due to make the payment without penalising the policyholder is called the Grace Period. Under LIC’s New Endowment Plan, the customers are provided with a 30-Day grace period if the premium payment frequency is annual, bi-annual and quarterly and a grace period of 15 days if the frequency is monthly. If the policyholder is unable to clear the dues during this time, the policy will lapse.
If the death of the policyholder occurs during the grace period, the plan would still be valid and the nominee will receive all the benefits.
- Revival Period
In case the New Endowment Plan has lapsed due to failure of payment of premium, the policyholder has a provision to revive it. However, the revival must be initiated within 2 successive years of the initial unpaid premium and before the date of maturity of the policy.
- Availability of Policy Loan
The policyholder has the facility to take a loan against his New Endowment Plan provided, 3 full years’ premium has been paid. It is critical that the policyholder has been regular with his premium payments. The rights to accept the same term and conditions of the plan, remain reserved with LIC. If the policyholder wishes to revive the Rider, it will be regarded only along with the plan revival. Revival of the Rider cannot be done in isolation.
- Free-Look Period
Sample Premium Amounts
|Age of the Insured/ Policy Tenure
|15 years Policy
|25 years Policy
|35 years Policy
|71.20/Rs 1000 Sum Assured
|40.10/Rs 1000 Sum Assured
|28.10/Rs 1000 Sum Assured
|71.50/Rs 1000 Sum Assured
|40.75/Rs 1000 Sum Assured
|29.40/Rs 1000 Sum Assured
|72.85/Rs 1000 Sum Assured
|43.25/Rs 1000 Sum Assured
|33.15/Rs 1000 Sum Assured
|77.10/Rs 1000 Sum Assured
|49.40/Rs 1000 Sum Assured
Mode as well as High Sum Assured Rebate
This policy offers a rebate for High Sum Assured as well as encourages annual premium payment by offering a discount.
|% of discount
|2% of the Tabular Premium
|Mode of Premium Payment
|2% of the Tabular Premium
|Quarterly and Salary Deductions
|% of discount
|Rs 1,00,000 to Rs 1,95,000
|Sum Assured Discount
|Rs 2,00,000 to Rs 4,95,000
|2% of Basic Sum Assured
|Rs 5,00,000 and above
|3% of Basic Sum Assured
Sample Premium Calculation
35 year old non-smoker male
Policy tenure= 25 years
Sum Assured is Rs 3,00,000
Premium factor: 40.75/1000 * 3,00,000= Rs 12,225 + taxes
But with discount it comes to Rs 11,381 + taxes.
Exclusions in LIC’s New Endowment Plan
LIC’s New Endowment Plan would be invalid if the insured individual, whether sane or insane, commits suicide.
- If the individual has committed suicide within a year of buying the policy, LIC will not present any claim other than 80% of the amount paid through premiums, if the policy is in force.
- If the individual does so within a year of revival of the policy LIC will not present any claim other than 80% of thepremiums paid till the date of death.
This regulation explains the situations under which the money paid towards this policy is not forfeited.
- Premium paid for a tenure less than 3 years:
- Policy will be terminated after the grace period is over from the first unpaid premium date
- All benefits under this plan cease to exist
- Premium paid for at least 3 years:
- The plan is not void completely
- The sum assured will be reduced to ‘Paid-Up Sum Assured’ which would bear a ratio equal to the total premiums that were originally stipulated
- Existing vested bonus may remain attached but there will be no entitlement to participate in further profits.
Claiming for LIC New Endowment Plan
To make the death claim the claimant nominee first has to lodge the claim with LIC office. He then has to submit the following documents:
- Claim forms that are prescribed by LIC
- Primary Policy Papers
- NEFT Mandate
- Proof of death
- ID and address proof of the nominee
- Medical Treatment prior to death
Maturity Claim and Surrender Claim
In case the policyholder has to make a maturity claim or a surrender claim, he needs to submit the following papers:
- Discharged Form
- Original Policy Papers
- NEFT Mandate from the Claimant
- Bank Details
LIC’s New Endowment Plan is a participating endowment plan that offers a combination of safe-keeping and savings. The basic plan offers a death as well as maturity benefit. The plan is considered to a good option for long-term investors who are looking for an insurance cover too. The plan is also considered to be an ideal and disciplined way of saving.
The policyholder can add-on LIC’s Accident and Disability Benefit Rider to his policy. This rider may be purchased either at the time of buying the plan or at a later stage, provided that the plan is in force.
If the insured individual has regularly paid all his premiums regularly for the initial three years of purchasing the policy, he is eligible for a surrender value. After three years only, the policy collects a claimable surrender value.
In case the premium paying frequency that you have selected is monthly, then you have a grace period of 15 days. In case of quarterly, semi-annual and annual frequency there is a 30-Day grace period. The policy will lapse if you do not pay your dues within this period.
If the policyholder does not pay the premium amount even in the grace period provided, the policy will lapse. However, the policyholder can revive it within a time limit of two years from the first unpaid premium date. But, it should be remembered that the revival has to be done before the maturity date.
If the policyholder does not pay the premium even during the grace period, the policy will fail. Nevertheless, the policy can be revived within a time period of two years from the first unpaid premium date. But it is crucial that the revival is done before the policy’s maturity date.
LIC’s New Endowment Plan would be invalid if the insured individual, whether sane or insane, commits suicide. If the individual has committed suicide within a year of buying the policy, LIC will not present any claim other than 80% of the amount paid through premiums, if the policy is in force. If the individual does so within a year of revival of the policy LIC will not present any claim other than 80% of the premiums paid till the date of death.
If the policyholder wishes to add the Accidental and Disability Benefit Rider to his base plan, he can do so by adding a small amount to the premium amount. If in case the policyholder’s death or disability in an accident, during the term of the policy, the nominee would receive an extra amount apart from the sum assured.
The maturity benefit under LIC’s New Endowment Plan, which is received by the surviving policyholder when policy term matures, is tax-free under Section 10 (10D) of the Income Tax Act.
An endowment plan which participates in the profits of the company, i.e. gets bonus for the company’s profits, is called a “participating” endowment plan.
Terms and conditions under which the premium paid towards the policy cannot be forfeited by the company is called Non-forfeiture clauses.