Should you invest or buy LIC capital plans?

Insurance companies must offer a range of plans and policies suitable for policyholders. Life Insurance Corporation, popularly referred to as LIC, is known for its LIC endowment plans, a form of life insurance and investment plan.

While other private insurance companies focus on other forms of insurance, most of the policies offered by LIC are premium savings plans. Here are a few things to consider when investing or purchasing a LIC endowment plan.

What is a gift policy?

The question to be answered is what is meant by LIC endowment plan. Simply put, endowment insurance is a combination of both investment and insurance, just like ULIPs (Unit Linked Insurance Plans). However, endowment plans offer a guaranteed return, while ULIP offers a return that depends on the market.

The life of the policyholder is insured for a pre-agreed period and the coverage is referred to as the sum insured. The policyholder pays a premium, part of which is used to cover the costs of the company and the remainder is invested in the policyholder’s account.

There are two types of premium savings plans: with or without profit. There are several options from which policyholders can choose, such as a life pension, education for children or a retirement plan.

What are the key features of the LIC Endowment Plan?

The USP of LIC’s new endowment plan is that it serves a dual purpose: to insure the policyholder’s life and investment at the same time. This combination is useful in the event of the policyholder’s death, as the family is entitled to a lump sum payment when the policy expires.

One of the biggest concerns family members of a deceased policyholder have is a cash flow problem. However, this endowment and investment plan provides a loan facility to take care of this problem.

The endowment plans help wage earners to save in a systematic way and provide financial security. The LIC endowment plan is also an excellent option for those who do not like risk as it is a safe plan to go for.

What are the benefits of endowment plans?

Some of the main benefits of investing in endowment plans are:

• Long-term insurance

• Risk-free and safe option

• Systematic savings

• Insured bonuses

• First class flexibility

• Double tax benefit

Another advantage is that riders can be added to the policy, such as disability and accident benefits. Under this rider, an additional benefit is added to the policy that insures the policyholder in the event of accidental death as a result of the accident.

In the event that the policyholder becomes incapacitated, as part of the rider, a payout plan will be executed based on agreed terms. Please note that these drivers are eligible for discounts based on a higher premium amount of the policy purchased.

What are the benefits offered under the LIC Endowment Plan?

The various benefits granted under the bounties and investment options offered by LIC include:

• Death benefit

• Duration allowance

• Profit sharing

In the event of the policyholder’s death, a death benefit is due during the policy period, provided all premiums have been paid. However, it should be noted that the payment cannot be less than 105% of the premiums paid.

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The basic amount with any revision premiums and any additional bonuses, together with a lump sum, will be paid to the policyholder on the due date. However, these payments will take place once all premiums have been paid.

Bonuses can be declared for a policy when the results of a policy claim are determined, either due to maturity or death of the policyholder. The clause does apply that the policy must have a minimum term as stated in the policy schedule signed and approved by both the insurer and the policyholder.

Are there any tax benefits available by investing in premium gift policies?

Yes, policyholders who invest in endowment insurance receive tax benefits. Policyholders are entitled to an Article 80 C payment on the premium paid and under Article 10 D instead of a death benefit.

The dual incentive in the form of tax relief encourages people to invest in long-term plans that benefit policyholders.

What Factors Should Be Considered When Selecting a LIC Endowment Plan?

When selecting an endowment plan, consideration should be given to the policyholder’s current stage of life, income, investments, long-term financial goals, number of dependents, and individual needs. The premium rates offered by the insurer, a track record for bonus payments, reputation, financial strength, claim and settlement ratio and financial strength must also be taken into account.

Choose a plan that is easy to understand, simple, and uses terms you are comfortable with. Avoid choosing a complex policy and read the insurance document carefully before signing on the dotted line.

LIC endowment plan is a safe and reliable investment that one will never regret. Investing in such a policy can help ensure financial security and an excellent option to fall back on in times of need.