Endowment plans are traditional savings oriented plans which help you to create a guaranteed corpus for your financial needs and also enjoy insurance coverage at the same time. LIC is the oldest life insurance company in India which enjoys the trust of millions of customers. The company also offers a range of life insurance plans to its customers for their needs. Endowment plans are also offered by LIC which allow guaranteed benefits with insurance coverage. LIC New Endowment Plan is one such LIC endowment plan which has good coverage benefits. Let’s explore the plan in details –
LIC’s New Endowment Plan is a traditional savings oriented life insurance plan. The plan helps you save and generate returns while at the same time provides you with insurance coverage against the risk of premature death. You can buy the policy to fulfil different financial goals that you might have for the future.
Here are the key features and benefits of LIC’s New Endowment Plan which deserve to be mentioned –
Eligibility conditions of LIC Endowment Plan
8 years to 55 years
Maximum maturity age
Term of the plan
12 years to 35 years
Premium paying term
Equal to the term of the plan
Minimum – INR 1 lakh
Maximum – no limit
Depends on age, sum assured and term selected
The different types of benefits paid by LIC’s New Endowment Plan are as follows –
If the insured dies before the policy tenure comes to an end, a death benefit is payable. This death benefit is equal to the Sum Assured on Death and vested reversionary bonuses and any final bonus. The Sum Assured on Death is defined as higher of the 10 times the annualized premium or the basic sum assured that you chose at the time of buying the policy. The total death benefit, including bonuses, should not be less than 105% of aggregate premiums paid till the date of death.
When the chosen term of the policy comes to an end, the plan is said to mature. On maturity of the policy, the sum assured, vested reversionary bonuses and any final additional bonus is paid to the policyholder as maturity benefit.
The plan earns simple reversionary bonuses every year throughout the term of the policy if the due premiums are paid on time. These bonus additions help in enhancing the benefit payable at the time of death or maturity. Moreover, at the time of payment of the death benefit or the maturity benefit, a final additional bonus might also be paid by LIC depending on its profit experience.
Under the plan, LIC’s Accidental Death and Disability Benefit Rider is offered as an optional coverage benefit. This rider covers deaths and disabilities suffered due to an accident. If the insured dies or becomes permanently disabled in an accident, the rider pays an additional benefit along with the basic benefit payable under the policy. In case of accidental death, the rider sum assured is paid. In case of permanent disability, on the other hand, the rider sum assured is paid in monthly instalments for 10 years. Moreover, future premiums are also waived off but the policy continues. You can buy the rider at an additional premium. The minimum rider sum assured that you can choose is INR 1 lakh and the maximum is limited to INR 50 lakhs. Moreover, individuals aged above 18 years can buy the rider and the rider cover stops when the insured attains 70 years of age.
There are two types of premium discounts which are available under the plan. You can avail both these discounts if you fulfil the discount criteria. The types of discounts allowed and their criteria are as follows –
If you pay premiums annually, you get a discount of 2% of the tabular premium. If, on the other hand, premiums are paid half-yearly, the discount reduces to 1%. No discount is allowed for quarterly and monthly modes of premium payments.
This discount is allowed if you choose higher sum assured levels. The discount starts if the sum assured is INR 2 lakhs and above. If the sum assured is INR 2 lakhs to INR 4.95 lakhs, the available discount is 2% of the basic sum assured. If, on the other hand, the sum assured is INR 5 lakhs and above, the available discount is 3% of the basic sum assured.
Other benefits offered by LIC’s New Endowment Plan are as follows –
If you have paid premiums for three complete policy years and are unable to pay future premiums, you would not lose the benefits of the plan. In this case, the plan would become paid-up and run at a paid-up value. The paid-up value would be the reduced value of the sum assured that you selected for the plan. Moreover, the bonuses added till the date the policy becomes paid-up would also be added to the paid-up value and the amount would be called the total paid-up value. The formula for calculating the total paid-up value is as follows –
Total paid-up value = sum assured * (number of premiums paid / total number of premiums payable) + vested bonus
This value would be paid on death or maturity. Future bonuses would not be added to a paid-up policy. Moreover, if you had selected the accidental rider, the rider would also stop to apply on a paid-up policy.
If the policy has become paid-up and has acquired a paid-up value, you can also terminate the policy before the completion of the policy tenure. This termination is called surrender of the life insurance policy. When you surrender LIC’s New Endowment Plan, the surrender value would be paid. This surrender value would be higher of the guaranteed surrender value or the special surrender value. The special surrender value is determined by LIC from time to time. However, the guaranteed surrender value is calculated using a formula which is as follows –
Guaranteed surrender value = (aggregate premiums paid till surrender * surrender value factor for premiums) + (vested bonuses earned till surrender * surrender value factor for bonuses)
You get the option of reviving a lapsed policy which is running on a paid-up value. When the policy is revived, the policy acquires the full sum assured and the promised plan benefits are paid. To revive a lapsed policy you would have to pay the total outstanding premium and an interest on the outstanding amount of premium. A declaration of good health would also be required and if the company is satisfied with your insurability, the policy would be revived. Revivals are allowed within 2 years from the date of the first unpaid premium.
If the premiums for at least three policy years have been fully paid, the policy acquires a surrender value. Thereafter, if you want, you can avail a loan under the plan. Loan would be allowed as a percentage of the surrender value applicable under your policy. The maximum loan which you can avail would depend on the company. Moreover, an interest would also have to be paid on the loan which would be decided by LIC from time to time.
There are exclusions for suicide under LIC’s New Endowment Plan. These exclusions are as follows –
Here are the sample rates of premiums payable if you buy LIC’s New Endowment Policy. The rates are calculated using the following assumptions –
Age of the insured
Term 15 years
Term 25 years
Term 35 years
The surrender value factor is prescribed by LIC. It depends on the term of the plan and the period when the policy is surrendered. The later you surrender the plan the higher would be the surrender value factor.
The grace period under LIC Endowment Plan depends on the premium payment mode. If you pay premiums monthly, the grace period would be 15 days. For other modes of premiums, like quarterly, half-yearly or yearly, the grace period is 30 days.
The free look period, also called cooling off period under LIC Endowment Plan is the period after the issuance of the policy during which you can cancel the plan if you want. The free-look period which is allowed under the policy is for 15 days from the date of issue of the policy.
LIC Endowment Plan allows you dual tax benefits. The premiums that you pay for the policy are allowed as a tax-free deduction from your taxable income. You can claim a deduction of up to INR 1.5 lakhs through the premiums paid for the policy. Additionally, the death or maturity benefit paid under the policy is also allowed as a tax-free income. The death benefit or the maturity benefit received would be completely tax-free under Section 10 (10D).