LIC’s Term and Whole Life Insurance Plans
The Life Insurance Corporation of India was established in the year 1956 as the sole life insurance company in India. Till the year 2000 LICI enjoyed a complete monopoly in the life insurance business before other private players entered the life insurance market. Today, even when there are about two dozen life insurance companies, LIC enjoys the largest market share in terms of premiums collected and the number of policies sold. Moreover, the company also boasts of having the largest customer base since people have an intrinsic trust in LIC when it comes to buying life insurance.
LIC offers a range of life insurance plans to its customers and term plans, as well as whole life plans, are also a category of life insurance plans offered by the company. Let’s understand what these plans are and the corresponding plans in each category which the company offers–
What is a term insurance plan?
A term insurance plan is a basic life insurance plan which offers to pay the sum assured if the insured dies during the term of the plan. In case the plan matures and the insured is alive, term insurance plans, usually, do not pay any maturity benefit. Term plans are, therefore, also called pure protection plans as they cover the death risk of the insured.
What is a whole life plan?
A whole life plan is like a term insurance plan with no fixed policy duration. The plan runs for the entire lifetime of the insured until the insured attains 99 or 100 years of age. During this period, if the insured dies, the sum assured is paid as the death benefit.
Salient features of term and whole life plans
Term plans have the following distinct features –
- Premiums of the plans are very low since both plans cover only death risk
- Since the premiums are low, individuals can afford to buy a high level of sum assured under both the plans. This high level of sum assured ensures financial security for the insured’s family if the insured dies during the policy term
- Coverage under term plans is allowed for longer durations. In the case of whole life plans, coverage runs till 99 or 100 years of age
- Many terms and whole life plans have inbuilt riders which aim to increase the scope of coverage of the plan. Common riders which come inbuilt include accidental death and disability benefit rider, terminal illness rider, critical illness rider, etc.
- In many plans, the death benefit is also paid in monthly instalments to create a regular source of income for the family
- Term plans come in many variants which include the following –
- Level term plan – This is the simplest variant where the sum assured remains the same throughout the policy tenure and is paid on death
- Increasing term plan – Under this plan the sum assured increases every year by a fixed amount and on death, the increased sum assured is paid
- Decreasing term plan – Under this plan the sum assured decreases every year and on death, the reduced amount is paid
- Return of premium plan – Under this plan, the premiums paid are returned back if the insured survives till the completion of the policy tenure
Term plans offered by LIC
LIC of India offers three types of term insurance plans which are as follows –
This is a pure term plan which pays only a death benefit in case the insured dies during the policy tenure. The salient features of the plan are as follows –
- Policy term of up to 25 years is allowed under the plan
- Premium rates are very low and affordable
- Premium can be paid yearly or half-yearly. Annual premiums are, however, lower than half-yearly premiums
- Premiums paid are allowed as deductions under Section 80C. The death benefit received is also tax-free under Section 10 (10D)
This plan is also a pure protection plan which pays the sum assured only if the insured dies during the term of the policy. Other features of the plan include the following –
- The plan offers high sum assured levels. The minimum sum assured starts at INR 25 lakhs
- Coverage for up to 35 years is allowed under the plan
- Premiums are affordable allowing individuals to avail high sum assured levels
- The death benefit received is completely tax-free in the hands of the nominee. The premiums paid are tax deductible upto INR 1.5 lakhs
This is an online term insurance plan which is offered by LIC through online platforms. Since the plan is online, it can be bought easily by filling up an online proposal form and paying the premiums online. The features of the plan are as follows –
- Premiums are very low as intermediaries are not involved in the selling the plan
- If sum assured of INR 50 lakhs and above is selected, individuals can get the benefit of non-smoker preferential premium rates which are lower than normal premium rates
- Maximum policy tenure goes up to 35 years
- Premium discounts are given for up to five policy years for buying the plan online
- The amount of premium paid is deductible from taxable income under Section 80C upto INR 1.5 lakhs. The death benefit is also fully tax-free under Section 10 (10D)
Whole life plans offered by LIC
LIC offers only one whole life plan which is LIC’s Jeevan Umang. The features of the plan are as follows –
- Premiums are payable for a limited tenure
- Annual survival benefits are paid under the plan after the premium payment term is over. This ensures liquidity
- A lump sum benefit is paid in case of maturity or death
- Loan facility is also available under the plan
- Coverage is allowed until the insured attains 100 years of age
- Optional riders are also available with the plan
- The premium paid is a tax-deductible expense under Section 80C. The benefit received is tax-free under Section 10 (10D)