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LIC Single Premium Endowment Plan

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LIC Single Premium Endowment Plan – An Overview

Single-Premium Endowment policy from Life Insurance Corporation, India is a participating yet non-linked, one-time lump-sum premium payment plan. This particular plan only commences when the premium is paid in full.

The most attractive thing about this plan is that the policyholder is awarded savings and a life cover at the same time. These dual benefits are good for those that don’t want to compromise with the financial safety of their families while also managing their wealth.

Depending on what the buyer wishes to use the corpus on, the LIC single premium policy can be used as a retirement or savings fund for dependents that they can inherit.

As opposed to the term plans, the endowment or single premium policies offer both death and maturity benefits. Death benefits can be accompanied with some bonuses as stipulated in the policy document.

What is LIC Single Premium Plan?

The Life Insurance Corporation single premium endowment plans (UIN allotted by IRDAI: 512N283V02) function as insurance policies that can provide a financial cover to the dependents of the insured individual while generating a sizeable return, which can also come with some bonuses (reversionary and terminal).

This particular plan has substituted the Jeevan Vriddhi plans, which used to be the LIC single premium policies. And similar to the Jeevan Vriddhi plans, the sum assured for this plan depends upon the period being opted for, and other details furnished by the applicant at the time of purchase.

This is a long-term plan, as the increase in the plan tenure helps amass better returns, just like most other insurance cum investment plans in the market. However, there are rebates and other additive bonuses that can also be availed if the applicant goes for a higher assured sum.

Another prominent feature of this plan is that it takes care of the immediate liquidity needs of the insured through loans. This is why most experienced advisors recommend this plan to investors that can afford to part with the one-time premium amount. Getting returns and an insurance cover from a single product is, after all, a very lucrative offer and makes them some of the best policies.

Being an insurance product, it also comes with tax-saving benefits. LIC also provides some riders that can be bought alongside the basic plan, which enhances the cover and risk protection ability of the policy.

But the best facets of this plan must be the one-time premium payment (a lump sum) and a guaranteed return on the investments, which translates into getting either death benefits or maturity benefits from the policy. So, if the insured individual expires during the tenure of the plan, the nominees and dependents are provided with financial benefits. On the other hand, if the insured individual survives beyond the term of the plan, they are given the stipulated sum as maturity benefits from the plan.

Therefore, these are the perfect single premium policies for investors that are usually deterred by the concept of getting just death benefits from their insurance plans.

Features and Benefits of LIC Single Premium Plan

Just like traditional insurance plans, the LIC single premium policies also come with some really attractive features and benefits. These are:

Death Benefits

  • If the demise of the insured individual occurs before reaching the commencement risk date, the premium amount sans the taxes and extra charges such as rider charges is returned to the nominee
  • If the insured individual dies during the policy term, but after the risk commencement date, the dependents of the insured are offered the assured sum along with the Reversionary bonuses and additional bonuses if they have been mentioned in the document
  • Simple Reversionary Bonuses are based on the profits earned by LIC (in this case) each year, by participating in the market opportunities on behalf of the policyholders
  • The assured sum is mentioned in the offered documents and is usually at least 1.25 times of the premium amount minus the taxes and premiums for the add-ons

Death or maturity benefits can be paid out in instalments rather than as a lump sum amount

  • Payouts for the death or maturity benefits can be offered in instalments over a period of 5, 10 or 15 years. This particular option is available during the term of the policy (for minors or individuals above the age of 18 years) and is applicable on partial or complete death or maturity benefits offered by the policy
  • The amount offered in instalments is known as the Net claim amount. If it is somehow less than the stipulated minimum, then the benefits are automatically offered as the lump sum amount only
  • This option has to be opted by the insured during their lifetime and while the policy is still active. The nominees can’t make any changes in the periodicity of the benefits or the net claim amount in case of death benefits
  • However, the insured individual can submit a written request for changing the mode of payment if he or she so wishes to
  • The net claim amount can either be a fraction of the entire total claim value. There is, however, a minimum amount that has to be opted for in the form of monthly, quarterly, bi-annual or annual intervals. These minimum instalment amounts are:
Mode of payment or intervals Minimum amount to be opted for (INR)
Monthly 5,000
Quarterly 15,000
Bi-annual 25,000
Annual 50,000

Maturity Benefits

  • If the insured survives beyond the policy term, then he/she is awarded the guaranteed assured sum on maturity (along with revisionary and extra bonuses, if stipulated in the documents)
  • The premium amount and profits are invested into the investment ventures undertaken by LIC, which can be paid out as Simple Reversionary bonuses on the discretion of the Corporation

Final or additional bonuses are announced or added by LIC in the policy benefits, but these might vary from year to year. The amount of these bonuses depends upon the year in which the death or maturity claim is filed and are regulated by the terms and conditions stipulated for that year by LIC

Rebate Offered

Rebates offered for opting a higher assured cover, which is as follows:

Assured Cover Amount (INR) Rebate (INR)
50,000 - 95,000 Not applicable
1, 00,000 - 1, 95,000 18% of the assured cover
2, 00,000 - 2, 95,000 25% of the assured cover
3, 00,000 - above 30% of the assured cover

Optional add-ons or riders are also available with this plan

There are two riders that are offered under this plan by LIC which have to be bought with the plan and aren’t available for purchase later on. These are:

Accidental Death and Disability Benefits

UIN allotted by IRDAI: 512B209V02. This rider offers additional protection against death or disabilities (partial or total) occurring due to accidents during the term of the policy. An additional cover amount is paid after an accidental death claim is filed; however, the disability cover only kicks in if the disability has arisen within 180 days of the accident. The disability benefits are also paid in monthly instalments over the duration of 10 years

New Term Assurance Benefits

UIN allotted by IRDAI: 512B210V01. This rider provides additional term assurance sum if the insured individual meets an untimely demise during the policy tenure

  • The premium for the accidental death and disability rider cannot exceed the base plan premium under any circumstance
  • Combined, all of the premiums (for the riders) cannot exceed 30% of the base plan premium
  • Also, the assured sum for both these riders cannot exceed the cover offered by the base plan

Liquidity for Short-term Needs of the Insured

  • Loan facility can be availed by the life assured individual under this policy, after the first year of the policy is completed. However, LIC can change the terms for the availability of loans on this plan
  • The maximum loan amount that can be availed under this plan is 90% of the assured cover amount
  • If the insured individual is a minor, the guardian (proposer) can avail a policy on behalf of the minor given that the loan is going to be used for funding their activities only
  • If the loan repayment defaults and the payment amount (along with interest) have the possibility of exceeding the surrender value of the plan, the insurer can foreclose such LIC single premium policies. And if there is a difference between the surrender value and the loan amount, then the insured individual is entitled to that amount
  • The interest rates involved are also governed under the conditions set by LIC, but once declared these are applicable for the full tenure of the loan. The interest rates have to be approved by the IRDAI beforehand
  • If there are any outstanding debts associated with the loan and the policy term is over. The amount is adjusted in the maturity benefits

Surrender Policy of the Plan

  • The policy can be surrendered to LIC during its tenure. LIC reserves the rights of deciding the surrender value of the plan, but it is either the guaranteed surrender value or the special surrender value, whichever is the highest amongst the two
  • The guaranteed surrender value is 75% or 90% of the one-time premium amount, if the plan is surrendered during the first year or after the first year is over, respectively
  • The percentage is taken out of only the base premium and not the taxes or rider premiums (or other charges)
  • Special surrender values are changed by LIC periodically but have to be approved by IRDAI beforehand
  • Simple reversionary bonuses also carry a surrender value of their own. This value is equivalent to the predetermined surrender value factor times the vested bonus amount. The surrender value factors are based on the elapsed policy term and the year in which the claim is filed

Tax Benefits

  • Income tax benefits can be availed on the premium amount. Under section 80C a maximum of Rs. 1.5 Lakh per year is deducted from the taxable income
  • On the other hand, for the maturity benefits to be awarded a tax rebate under section 10D of the IT Act, the offered cover amount has to be at least 10 times the premium amount in a year, which might not be the case with most single premium policy covers

The Option of Availing a Free Look or a Cooling-off Period

  • A period of 15 days from the date of receiving the policy document is given to every buyer to essentially test or examine the terms and conditions involved with the policy. If he/she isn’t pleased with the policy, then the policy can be returned to the Corporation by stating the reasoning behind sending it back. The Corporation can then cancel the plan and return the premium amount (minus the risk amount for both the base plan and riders and other charges like medical check-ups) to the buyer.

Inclusions of LIC Single Premium Plan

LIC single premium endowment plan is an ideal choice for investors as it offers multiple realistic benefits:

  • It is an investment venture and an insurance product, all wrapped up in a single scheme. The maximum entry age for the plan is set at 65 years of age, and it matures at 75 years of age, ensuring that no matter what occurs, the insured individual will get to enjoy the benefits included in the plan
  • Since these plans are single premium policies, one-time payment for the premium is good for individuals that can afford to splurge on an insurance plan in one go
  • The policy also lets the insured individual borrow loans against the offered cover
  • There are additional riders that can be bought alongside the base plan, such as the accidental death and disability, which can provide financial covers for these unfortunate incidents, making them some of the most lucrative and best policies when it comes to insurance
  • Tax reduction is guaranteed under section 80C of the IT Act; although the maturity benefits may or may not be exempt from being taxed depending upon the terms and conditions included in the section 10D of the IT Act
  • The plans also come with a guaranteed surrender benefit, depending on the time the policy is kept active for
  • Vested bonuses such as the reversionary bonuses and final bonuses are also offered to the investors. These bonuses are also included in the surrender value of the plan

Exclusions of LIC Single Premium Plan

All claims made after the death of the policyholder are entertained for paying out the entirety of death benefits or assured sum, except the claims made for deaths arising from suicides or self-harm. The benefits are governed under the provisions mentioned below:

  • If the insured individual meets their untimely demise due to self-harm, self-injury or suicide, within 1 year from the date of risk commencement, then the nominees are entitled to either 90% if the premium for the base plan or the surrender amount, whichever is higher
  • LIC doesn’t entertain any other sort of claims under this plan
  • The premium amount which is used to calculate the death benefits excludes any additional charges including taxes levied, additional premiums, but not the term assurance rider if these are bought alongside the base plan

Eligibility Criteria for LIC Single Premium Plan

LIC single premium endowment policy has the following limitations and eligibility conditions:

Eligibility criteria Stipulated details
Minimum entry age for the plan 90 days
Maximum entry age for the plan 65 years
Minimum age at the time of maturity for the plan 18 years
Maximum age at the time of maturity for the plan 75 years
Minimum Policy tenure 10 years
Maximum Policy tenure 25 years
Minimum assured amount Rs. 50, 000
Maximum assured amount No upper cap (but has to be a multiple of Rs. 5,000)
Premium payment intervals Single or one-time-only (for riders as well)
The date for risk commencement For a minor policyholder below the age of 8 years:The risk will commence under the plan 2 years from the date of policy commencement or from the policy anniversary coinciding with the completion of 8 years of age, whichever falls the earliest.For policyholders above the age of 8 years:Risk commences immediately, with no waiting period.

The Claim Process for the LIC Single Premium Plan

The claim settlement process is an indelible part of any insurance plan, which is also applicable on the LIC single premium policies. As the process is an integral part of the services offered to all policyholders, LIC puts an emphasis on the claim settlement process. LIC has a claim settlement ratio (CSR) of 97.79% for the fiscal year 2018-19, which makes their plans some of the best policies for the average Indian consumer.

For this plan, the date of the policy is the date of risk commencement, which will be mentioned in the documents related to the plan. Any claims arising before the risk commencement date are usually not entertained.

The claim settlement procedure is applicable to maturity, death or accidental death and disability benefits. These procedures are listed below:

Claim Settlement Process for Maturity Benefits

The policy benefits are paid out after the policy has expired (the policy tenure mentioned in the policy documents are over) and the plan has attained its stipulated paid-up value.

Claim Settlement Process for Death Benefits

Upon the death of the insured individual, if it has occurred during the tenure of the plan, then the insured’s dependents can file for a claim to get death benefits. LIC categorises death claims into either death claims arising within 3 years from the date of the policy (risk commencement) or death claims arising after 3 years from the date of the policy.

The documents for both cases differ slightly, which will be covered in the next section.

If any riders have been bought as well, then these can be claimed alongside the maturity or death benefits stipulated in the basic plan. These have to be mentioned in the claim form for both benefits.

Claim Settlement Process for Accidental Death and Disability Benefits

Accident Benefits can be claimed if the policyholder has bought the appropriate rider attached with it. For claiming these benefits, the insured individual must have an active plan and should furnish some necessary documents like FIR, post-mortem report, and a valid disability certificate.

The riders are terminated alongside the base plan, as soon as a claim is successfully processed.

Policy documents along with, required KYC documents, a filled-out claim form (depending on the case) with an NEFT mandate form has to be provided to the insurer to process the claim. If the applicant submits photocopies of the forms, then these documents have to be self-attested as well as authorised by authorised personnel from LIC.

Review of Claims

LIC settles numerous claims per year, provided that all these claims are substantiated and genuine. If the claimant suppresses information from the Corporation or provides fraudulent details, then the claim can be denied.

When a case is suspected for non-disclosure of pertinent information, the claimant is also allowed to appeal with the Reviewable committees (zonal or central offices). This maintains transparency in the claim process which ensures that the satisfaction of a policyholder is always at the forefront.

Grievance Resolution

IRDAI and Government of India have established the Insurance Ombudsman scheme for settling grievances arising between an insured individual and the insurance provider. As such, claims that have been rejected and delayed by an insurer, disputes around premium payments, and other issues regarding a purchased policy can be brought before these ombudsmen, who address the complaints with no added costs.

Documents required to claim under LIC Single Premium Plan

Requirements for filing and settling a claim are:

Documents for Maturity Benefits

  • Policy document (original)
  • Self-attested KYC documents (ID proof, address proof, copy of PAN card, bank account details in the form of a cancelled cheque or copy of the bank statement)
  • Filled out NEFT mandate form
  • Duly filled out claim form no. 3825

Documents for Death Benefits

  • Policy document (original)
  • Death certificate (original)
  • Written application from the end of the insured individual’s dependent or nominee stating the details of the policy or policies, name of the life assured, date and cause of death and the relationship between the nominee (the claimant) and the insured (now deceased)
  • Self-attested KYC documents (ID proof, address proof, copy of PAN card, bank account details in the form of a cancelled cheque or copy of the bank statement)
  • Filled out NEFT mandate form
  • Duly filled out the claim form
    • Claim form (A) in form no. 3783 (for claims arising after 3 years of the date of the policy)
    • Claim form no. 3783 (for claims arising within 3 years of the date of the policy)
    • Claim form no. 3785 (form C for identifying the deceased by someone who has attended their cremation or burial)
    • Proof of age if not acknowledged in the policy documents
    • If the policyholder has not declared a nominee, then the claimant or spouse have to furnish proofs for having a claim on the deceased’s estate

Documents for accidental death and disability benefits

  • Certified First Information report (copy of the FIR)
  • Post-mortem report
  • Report from the police officials about the investigation

These forms are required to satisfy the insurer about the veracity of the claims from the policyholder. For deaths arising due to accidents, the claimants also have to furnish the details mentioned above for filing a claim to procure death benefits.

All claim forms and the NEFT form, are available for download on the official website of LIC.

How to Buy the LIC Single Premium Plan

A prospective buyer for this plan has to make sure that they are getting the best out of their investments. To ensure this, the buyer can choose an appropriate option out of the following:

Offered Sum

The cover amount being offered to the buyer can be from a minimum of Rs. 50,000, with no upper limit to the plan. The assured sum should, however, be a multiple of Rs. 5,000.

Tenure of the Policy

  • The duration, for which the buyer wishes to be covered, this can range from a period of 10 to 25 years.
  • These two factors decide the single premium that has to be paid by the insured individual. Although, the official LIC website has a handy calculator that can be used to come up with the approximate value of the premium that has to be paid
  • The plans are available for purchase in both the online and offline mode:
    • Online mode: plans are available on the LIC website for purchase. The buyer has to go to the online portal, choose the single premium endowment plan, select the coverage required, the term of the plan and other required details
    • Offline mode: the policy can be purchased through LIC agents, associated banks and intermediaries, where they can guide the applicant through the application process

Once, the selection is made, and the customer is happy with it, the premium payment can be made via the online portal or at the dedicated cash counter. Even though the plan can be purchased through either of these modes, if the buyer is tech-savvy, then it is better to go with the online mode, as the premium doesn’t carry additional charges that are involved with the offline mode.

Required Documents to apply for the LIC Single Premium Plan

Documents required to purchase LIC single premium policies are:

  • An age proof (Aadhar card, valid passport, birth certificate, etc.)
  • A valid identity proof (Aadhar card, PAN card, driver license, etc.)
  • Filled out application or proposal form
  • Proof of annual income (in the form of tax returns, salary slips
  • Medical reports (if required by the insurer)

Renewal Process of the LIC Single Premium Plan

The best and most attractive quality about single premium policies is the fact that the buyer has to make only one premium payment, which reduces the hassle that is involved around keeping up with due dates for renewal or grace periods.

It is a wise choice to compare plans online before settling for a specific option, as there are many suitable insurance plans online with added investment opportunities.

FAQs

  • Q1. Where can the customer make payments, if the individual has chosen to apply through the online mode?

    Ans. A prospective buyer has the facility of making a premium payment within the online portal of the insurer, LIC. Apart from that, LIC does have existing arrangements with certain banks and service providers (select cities) that have been authorised to collect premium payments on their behalf.

    These are HDFC Bank, ICICI Bank, BillDesk.com, Citibank, Corporation Bank, Timesofmoney.com, Federal Bank, UTI Bank, Bank of Punjab, and BillJunction.com.

  • Q2. How is the offline premium payment for single premium policies from LIC made?

    Ans. Offline payments can be made through:

    • Paying cash in the LIC offices
    • Cheque payments in the LIC offices, agents, brokers or intermediaries
    • National Automated Clearing House Pay (NACH)
  • Q3. What exactly is the surrender value of a LIC single premium policy?

    Ans. The amount that is paid to the policyholder if the plan is discontinued in the midst of the plan tenure or surrendered to the insurer. The plan would attain its surrender value only if the premium has been paid in full. And if the policy is of the participating kind, then the policyholder is also awarded bonuses.

    Surrender value can be calculated using this formula: Surrender value factor multiplied by assured sum plus total bonus.

  • Q4. How can the policyholder check the status of a purchased plan?

    Ans. The policyholder can register on the online portal of LIC and can then receive regular updates about the plan. Conversely, there is also a way to track the status of the plan through SMS updates. This reduces the hassle of going back to the online portal and manually check the status regularly.

    The policyholder has to make sure to keep a note of the policy number and other required details at all times. They might be asked to furnish these details time and time again.

  • Q5. Is it possible to know the status of a LIC plan by visiting a LIC branch?

    Ans. If the policyholder is not very well-versed with technology and would rather prefer knowing the status of the insurance policy by authorised LIC personnel, then they can visit an official LIC branch or office.

  • Q6. Who should opt for a LIC single premium policy?

    Ans. This plan is ideal for investors that have some dispensable income and wish to provide financial protection to their dependents in case of their untimely demise while making sure that their investment accrues returns that can be enjoyed if they survive beyond the term of the plan.

    Risk-averse investors are often advised to invest in these plans as they are safer in comparison to other investment cum insurance plans.

  • Q7. Does LIC offer insurance products for NRI?

    Ans. Yes, LIC does have a few insurance plans specifically catering to NRI investors.

Written By: Paisawiki - Updated: 17 March 2021