Life Insurance: Different Policies Explained

Life insurance is a contract between an insurance policyholder and an insurer, where the insurer promises to pay a designated beneficiary a sum of money (the benefit) in exchange for a premium, upon the death of an insured person (often the policy holder). The policyholder typically pays a premium, either regularly or as one lump sum.

In addition to providing protection, life insurance can also be a part of a comprehensive financial plan. Many people believe that they don’t need life insurance if they don’t have dependents. The truth is, even without dependents, life insurance can be a great way to save for future goals such as retirement. Thus life insurance can play an important, and flexible, role.

LIC of India, the nation’s largest life insurance company, offers a wide range of life products for different eventualities. Let’s look at the most common varieties:

1. Term Life Plans

Term assurance provides life insurance coverage for a specified term and is life insurance in its most basic and cheapest form. You pay premium in lumpsum or regularly over a period of time, for a sum assured for a specified period chosen by you (the term), which is the amount of money your beneficiary receives if you die unexpectedly during the specified term chosen by you.

Term life policies, such as LIC’s Anmol Jeevan II and LIC’s Amulya Jeevan II, guarantee a sum assured payable on death during the chosen policy term.

LIC’s e-Term plan is an online only term plan and an easy and cost-effective way to protect your family. This plan is available through online application process only and no intermediaries are involved.

2. Endowment Plans

Endowment is a combination of protection and savings whereby the money will be paid on your survival to the end of the specific term chosen by you or is paid to your nominated beneficiary in case of your unfortunate demise during the term. Thus, your dependents are protected in case of your unexpected death, and you also get a return on the premiums paid at the end of the term.

While buying LIC’s endowment plans, you can choose whether you would like to pay a regular premium (LIC’s New Endowment Plan), single premium (LIC’s Single Premium Endowment Plan) or pay premium for a term less than the full policy term (LIC’s Limited Premium Endowment Plan/LIC’s Jeevan Labh).

LIC offers many variations in endowment type plans fulfilling your different needs such as periodic return of money, annual income benefit, automatic increase in death cover, receiving (i.e. Maturity Benefit or Death Benefit) in instalments etc.

In case you wish to receive money at periodic intervals during the term of the policy, you can opt for LIC’s New Money Back plans. Besides providing life cover during the term (20 & 25 years) of the policy, survival benefits at specified durations linked to the sum assured during the term of the policy are available. On maturity, the balance sum assured along with accrued bonuses is payable. In case you have lump sum money to invest and desire to receive payments at periodic intervals, then you can opt for LIC’s New Bima Bachat. On maturity, the lump sum premium paid along with Loyalty addition, if any, is payable.

If you wish to receive claim amount in instalments, you can opt for settlement option vide which you can receive the claim amount in instalments over the chosen period (5/10/15 years) or chosen frequency (yearly/half yearly/quarterly/monthly).

LIC’s Jeevan Lakshya provides for Annual Income benefit that will help to fulfil the needs of the family, in case of unfortunate death of Policyholder any time before maturity and a lump sum amount at the time of maturity irrespective of survival of the Policyholder. In case you wish to increase your risk cover automatically, you can take LIC’s Jeevan Pragati wherein the risk cover automatically increases every five years during the term of the policy.

Though most of LIC’s plans are available for minors also, there are few plans specifically designed for children only. New Children’s Money Back Plan provides life cover during the policy term, and survival benefits as a percentage of sum assured, payable after every two years starting from age 18 years to 22 years. In addition to it, LIC’s Jeevan Tarun allows you to choose between the four available options so as to decide the proportion of survival benefits (0%, 5%, 10% and 15%) to be availed each year from age 20 years to 24 years. On maturity at the age of 25 years, the balance sum assured along with the accrued bonuses will be payable.

3. Whole Life Plans

This combination provides financial protection against death throughout the lifetime of the policyholder.

LIC’s New Jeevan Anand is a unique with-profits whole life plan which combines the features of endowment and whole life plans. The premiums are payable regularly during a term chosen by you. This plan offers death cover for the whole of life. In addition, on survival till end of the chosen term, a survival benefit equal to Sum Assured along with accrued bonuses are also payable.

LIC’s Jeevan Umang plan extends the maturity age to 100 years. In addition to the whole life features, 8% of the basic sum assured is paid out every year on survival after “premium paying term” (the duration for which the premiums must be paid), until death or maturity, whichever is earlier.

4. Unit-linked Insurance Plans (ULIPs)

ULIPs offer a combination of investment cum insurance during the term of the policy. LIC’s New Endowment Plus allows you to choose the type of fund in which investment will be made (Bond fund, Secured fund, Balanced fund and Growth fund).

In a ULIP, the policyholder pays premium in a lumpsum or regularly, a portion of which goes toward life insurance and the rest of which is invested in capital markets, similar to a mutual fund. This goes on for the term of the policy. If the policyholder dies, the beneficiary receives (depending on policy terms) the higher of the fund value or basic sum assured.

ULIPs come with a lock-in period but are a great option for people looking for long-term investment and insurance. Since the returns are linked to the market, you have a better chance of growing your corpus for future goals such as your child’s education or your retirement.

5. Pension Plans

Pension plans or retirement plans offer you the dual benefits of investment and insurance cover. It is nothing but investing a certain amount regularly to accumulate over a specific tenure in a phased manner. This will ensure a steady flow of pension once you retire. If you begin contributing early, it will build towards secure golden era money-wise. A well-chosen retirement plan can help you rise above inflation, thanks to the power of compounding. The corpus (investment + gains) in your name by the retiring age can take care of increasing healthcare costs and lifestyle requirements. If you wish to retire early, your corpus upon maturity should be enough to support the additional years. Then you will be able to enjoy 2-in-1 benefits of building wealth while saving on income tax.

LIC’s New Jeevan Nidhi is a deferred annuity plan which combines the features of endowment and pension plans. This plan provides for death cover during the deferment period and offers annuity on survival to the date of vesting.

However, in case you have not planned for your retirement and you wish to receive annuity benefits immediately, you can use your retirement corpus or lump sum to buy LIC’s Jeevan Akshay VI. It is an immediate annuity plan with a number of annuity options including annuity certain and life thereafter, annuity with return of purchase price, joint life annuity etc. It can be purchased online as well as through intermediaries by paying a lump sum amount.

In addition, vide Pradhan Mantri Vaya Vandana Yojana scheme, senior citizens can invest up to15 lakhs and earn an assured return of 8.30% p.a. effective for the period of 10 years, in the form of regular income. The purchase price is returned at the end of 10 years. This scheme is available till 31.03.2020.

6. Health Plans

Health has been a major concern for everyone these days due to the skyrocketing medical expenses. You would not want to let any unfortunate incident affect your plans for you and your family.

To ensure peace of mind during hard times of medical emergencies, you can opt for LIC's Jeevan Arogya, in which you can take cover for you and your dependents in one policy. It provides cash benefits for hospitalization, specified surgeries etc. Additional benefits under the plan include increasing cover every year, no claim benefit and specified cash benefit for other surgeries which are not in the specified eligible surgeries.

There are some diseases such as Cancer, in which very high costs of treatment are involved. LIC offers Cancer Cover under two benefit options, Level and Increasing Sum Insured. It provides financial protection in case the Life Assured is diagnosed with Early and/or Major Stage Cancer during the policy term. On first diagnosis of any specified Early Stage Cancer, 25% of chosen sum insured is payable and premium for next three years is waived. On first diagnosis of any specified Major Stage Cancer, chosen sum insured less previously paid early stage cancer claim, if any, is payable. In addition, an income benefit of 1% of chosen sum insured is payable monthly for the next ten years.

7. Micro Insurance Plans

Micro-insurance policies promote insurance coverage among economically vulnerable sections of society.

LIC’s Bhagya Lakshmi is a micro insurance plan which provides death cover of up to Rs 50,000. On survival to the end of policy term, 110% of total amount of premiums paid during the policy term is payable. LIC’s New Jeevan Mangal is a micro insurance plan, which provides similar death cover but with an additional sum, equal to sum assured, payable in case of accidental death. On survival to the end of policy term, total amount of premiums paid during the policy term is payable. In this plan, policyholder can choose to pay either regular premiums or a single lump sum at the outset of the policy.

8. Special Plans

Some plans with special features, viz. LIC’s Jeevan Shiromani and LIC’s Bima Shree, are endowment plans specially designed for High Net-worth Individuals. These plans provide death cover, periodic payments on survival to specified durations, guaranteed additions to benefits with flexibility to receive death/maturity benefit either in lump sum or in instalments and option to defer the periodic payments. In LIC’s Jeevan Shiromani, there is an in-built critical illness cover for 15 specified critical illnesses and the facility of taking Medical Second Opinion.

LIC’s Jeevan Rakshak has been specially designed to extend insurance coverage to people spread across the country and can be purchased for sum assured of up to Rs 2 lakhs, without any medical examination.

In addition, LIC’s Aadhaar Stambh and Aadhaar Shila are one-of-a-kind endowment policies exclusively for Aadhaar card holders for men and women respectively. You can take these policies for sum assured up to Rs 3 lakhs, without any medical examination.

All Endowment and Whole Life plans of LIC also take care of liquidity needs through loan facility.

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