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 endowment plan 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 sonorities 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.
What are the Different Types of LIC Policy?
In India, the different types of LIC plans are broadly classified as pure risk cover or insurance and others which are a combination of insurance and investment. Based on these parameters, different LIC plans are:
Term Insurance Plan:
Term insurance plan is a pure risk plan for a fixed term and the most affordable policy to buy. The only death benefit is payable for demise during the currency of the policy and no pay-out after maturity. Though there are variations to this now.
It covers for the lifetime of the insured, and the premium is higher than Term Plans.
It facilitates insurance plus savings and is also referred to as traditional LIC plan.
Unit Linked Insurance Plan (ULIP):
It offers a combination of insurance and investment benefits, ensuring the growth of a corpus with higher market-linked returns from a diverse portfolio.
It aims to fulfill the milestones in your child’s life like education, marriage while extending life cover.
It helps build a corpus to enable you to lead a comfortable financially sound retired life.
Money back Plan:
While providing insurance cover for life, it also caters for periodic returns.
Benefits of Life Insurance:
The reason for buying a life insurance cover is manifold, making it an important component of your financial planning. Some of the key benefits are:
The most important benefit of the policy pertains to the cover for life financially protecting your family.
Payment of an assured sum as a death benefit to your nominee in the event of your death.
While extending life cover, LIC plans also give reasonable returns on your investment that helps you to grow your funds, depending on the plan chosen by you.
All your premium payments are allowed tax exemption for a maximum of Rs.1.5 lakhs under Section 80C of the IT Act, 1961.
Your policy allows you the facility of loans to meet unforeseen financial crunch.
Life Stage Planning:
You have the opportunity to plan for different milestones in your life like your child’s education and marriage, purchase of a house, car etc.
With the help of riders you can enhance the specific covers to match your preferences.
Method of Payment:
The Life Insurance policy is extended to you against a predetermined premium depending on your choice of plan, sum assured and your age. There are two types of modes for payment of premium. They are:
- Regular: The periodicity for such payment may be monthly, quarterly, half-yearly or annual, according to your convenience and agreed at the time of purchase of the policy. This is the most common method of premium payment.
- One-Time: In this case, the premium is paid in lump sum for a specific term of the policy. Most insurers have plans which can be called single premium policies.
Considering the pros and cons, it is worthwhile to surmise that single premium policies are beneficial to persons other than the salaried because of its overall convenience primarily. Recognizing just such a need, most insurers have formulated different plans to meet the demand. LIC being the major player in the industry have taken the lead in offering LIC single premium policies.