The first thing that comes to mind when you contemplate investing as a part of your financial planning to secure and insulate yourself and your family in the future is to buy an LIC Policy of your choice. It not only meets the necessity of building wealth through savings but also gives you life cover that ensures financial security to your family when you are not around. Additionally, you get the benefit of tax savings through various exemptions.
While buying LIC single premium policy is paramount, the method by which premium is most commonly paid at regular intervals. But some people do not have regular income flow to service a policy. Just in such a scenario, the need for single premium policies arose. And, surely there is a demand for such plans as there is a definite spike of such single premium policies being sold. Keeping pace with the demand, most insurers have designed policies, like LIC single premium policy to cater to this segment of clients. Before we start to assess as to which is beneficial, it is also imperative to know what it means and the different types of cover it offers.
What is an LIC Single Premium Policy?
LIC has launched various effective single premium policies in the market like Jeevan Vriddhi and jeevan nidhi. It is a contract between you and the insurer to pay a promised assured sum as a death benefit to your beneficiary or in the event of your survival, as maturity benefit against a fee called premium. The term, sum assured, amount of premium and the periodicity of payment is fixed at the time of purchase.
LIC Single Premium Policy: Jeevan Vridhi
LIC the largest insurer has a tailor-made LIC single premium policy named Jeevan Vridhi. It is an best endowment policy that apart from risk cover benefits you with Loyalty Additions and a Guaranteed Maturity Amount. The salient features of this plan are:
- Term: 10 years.
- Entry Age: 8 to 50 years.
- Sum assured: Rs.1.5 lakhs minimum.
- Premium: 30000 minimum.
- Mode: Single premium.
- Benefits: Guaranteed Maturity Sum.
Benefits of LIC Single Premium Policy:
LIC Single premium policies are advantageous in certain situations when the traditional regular payments are skipped in its favor. The top 5 reasons for opting for LIC single premium policies are:
- When you do not have a regular flow of income, a LIC single premium policy is the only alternative.
- When you receive a large sum of money and intend to invest in Life Insurance, this is the only choice.
- When you are filing your IT Returns, and you are short of exemptions, taking a single insurance premium may not be such a bad idea.
- It obviates the necessity to maintain payment schedules in the busy lifestyle trends that are prevalent now, saving you from default and policy lapse.
- For a similar sum assured, LIC single premium policies are cheaper for the total premium paid compared to the regular mode.
LIC Single Premium Policy: Jeevan Nidhi
As it is, the Jeevan Nidhi LIC single premium policy is essentially a participating deferred annuity scheme. The chief purpose of the LIC single premium policy is to capacitate substantial savings for income after retirement. Apart from that, life over is also furnished by the plan.
As Far As LIC single premium policy is concerned, the prospects of the Jeevan Nidhi plan need to be scanned inside out in order to better comprehend both the objective contours and the subjective sororities of the policyholder concerned.
Benefits of Jeevan Nidhi LIC Single Premium Policy
The following are some of the most fundamental benefits provided by the features of Jeevan Nidhi lic single premium policy:
- For the first five years of the term, Guaranteed Additions at a rate of five per cent of the basic Sum Assured shall be furnished to the concerned policyholder.
- Should the policyholder die within the course of the first five years of the term, the basic sum assured coupled with the accumulated guaranteed additions is disbursed in lump sum to the appointed nominee.
- However, should the policyholder die after the first five years of the plan the basic sum assured coupled with the accumulated guaranteed additions as well as the revisionary and the additional bonus shall be disbursed in lump sum to the concerned nominee.
- The said death benefit must at least be 105 per cent of all the premiums paid until the time of death.
The LIC single premium policy also provides income tax benefits under Section 80C of the Income Tax Act of India. Tax benefits on the death benefit are also disbursed under Section 10D.
Eligibility of LIC Single Premium Policy
So far as eligibility criteria for the LIC single premium policy are concerned, it is important to note that the minimum age of entry is twenty years whereas the maximum age is 58 years for regular pay and sixty years for single premium.
The following are some of the basic attributes of the plan as in the policy document:
- The LIC single premium policy, like any other plan, provides a grace period of fifteen days for the monthly mode of premium payment. Other modes of payment are allowed a span of thirty days in the LIC single premium policy.
- The plan also provides a free look period of fifteen days from the receipt of the policy documents in order for the policyholder to give up the scheme should he or she find the terms and conditions unacceptable.
- If terminated within the first three years of the plan the surrender value shall be seventy per cent of the premium shelled out. If not within three years, the value shall be ninety per cent of the premium disbursed.
- So far as the LIC single premium policy is concerned, it is crucial to keep in mind that no prospect of loans is included in the official attributes of the Jeevan Nidhi single premium plan.
- Riders are available. For instance, the accidental death benefit rider and the disability rider are the leading riders available under the plan.
- Rebates also are available for sum assured above Rs. 3 lakh.
LIC Single Premium Policy: Exclusions
- Should the concerned policyholder commit suicide during the first twelve months of the policy only ninety per cent of the premium paid is refundable in the case of the single pay plan.
- However, in the case of the regular pay plan, only eighty per cent of the premium paid is refundable. Also, it is important to note that should the policyholder commit suicide within the first year of the revival of the plan the surrender value alone is refundable.
From the above specifications of the LIC single premium policy it is wise to consider the subjective contours of the concerned policyholder. As it is, the Jeevan Nidhi single premium policy is essentially a participating pension plan. Put simply, it is a venture in long term investment in that it is meant chiefly to cater to the retirement corpus. As a result, it is vital to distinguish between the prospects of equity schemes and endowment plans. Generally, experts maintain the former is a more suitable alternative when it comes to investing for long term benefits and financial goals.
Doubtless, there are obvious tax benefits under LIC single premium policy. However, it is moot whether it is at all sapient to stay invested in endowment plans for decades only to save tax. As it is, traditional plans such as these do not leave much to the concerned investor to traipse along with. Therefore, before going for the premium plan it is vital to distinguish between the contours involved and approach a financial planner.
Should You Invest in LIC Single Premium Policy?
The single premium plan also provides Guaranteed Additions for the course of the first five years. Additionally, from the sixth year of the term, the plan provides revisionary bonuses and final additional bonus. The increments constitute one of the highlights of the single premium policy.
Whether it is beneficial or not to invest in the single premium plan may be understood by taking a look at some of its basic benefits. Apart from that, in order to review whether the plan is propitious or not one need also consider the subjective financial priorities of the potential investor. Generally speaking, a plan is only so much beneficial as it is in optimal congruence with the financial preferences of the investor concerned.
As far as the LIC single premium policy is concerned, it comes in different shapes and sizes in order to cater to a broad spectrum of pecuniary needs as much as possible. While objective consideration constitute the basic review policy, it is none the less crucial to identify the subjective financial priorities involved. That way, it certainly becomes more convenient to pick the areas of contention and judge accordingly. The single premium policy is undoubtedly beneficial in more ways than one, not to mention the substantial tax benefits. However, when all is said and done, it is up to the potential investor to review his or her personal objectives in order to turn to the most appropriate plan.