Undeniably, getting the appropriate balance between security and returns is the issue when it comes to planning the finances of any individual. In the country, Life Insurance Corporation of India is the biggest and the most trusted insurance provider, and they have numerous products in the market addressing these requirements.
Among its flagship products, the LIC Single Premium Endowment Plan stands as an ideal mix of insurance cover and savings and has quickly gained ground as a sought-after option for cautious investors seeking guaranteed returns and life protection.
In other words, once that single lump sum premium is paid during the start of the term of the policy, the assured receives the coverage provided by the insurance policy for the whole term, and also he gets the maturity benefit if the insured person survives the term.
In this article, let’s deep dive into some salient features, benefits, and eligibility criteria as to why LIC Single Premium Endowment Plan would be an intelligent choice for long-term financial security.
What is LIC Single Premium Endowment Plan?
The LIC Single Premium Endowment Plan is a non-linked, participating endowment policy.
As an old-fashioned insurance product, it offers a life cover coupled with savings benefits. Here, the customer pays only one lump sum as premium and avails of life insurance coverage through the term of the policy.
Now, after the successful completion of the policy term, the policyholder is left with a maturity benefit consisting of the basic sum assured along with bonuses. The reason for which the policyholder required the insurance cover is nullified in case he/she dies during the policy term: in which case, a death benefit matures, and the nominee receives this amount.
This is a good plan for those seeking an insurance cover and a risk-free investment without the pressure of paying recurring premiums. The declared bonuses of LIC enhance the desirability of the plan. It participates in the profit sharing by the corporation.
Summary of LIC Single Premium Endowment Plan –
1. Single Premium: The one big attraction of this plan is the option of a single premium payment. At the inception stage of policy, if the policyholder can pay a one-time premium for the entire policy term for insurance coverage, then there will be no need to bother about periodic premium payments.
2. Life Cover: It provides life insurance cover for the whole term of the policy, so that the family of the policyholder will be protected against financial insecurity in case of premature death. Any benefit payable on death, along with sum assured and added bonuses, is payable to the nominee.
3. Maturity Benefit: On survival of the life assured during the policy term, the policy provides for a maturity benefit consisting of the sum assured plus accrued bonuses. This can be a handsome amount to be received at the maturity of the policy, based on the sum assured and the duration of the policy.
4. Bonuses: The LIC Single Premium Endowment Plan is eligible for bonuses since this is a participating policy. The LIC declares these bonuses from the surpluses generated by the company and adds the same to the sum assured of the policy. Over the duration of a policy, such bonuses may work quite appreciably to enhance the maturity amount eventually received at the expiry of the policy.
5. Loan Facility: Loan facility can be withdrawn on the policy only when it acquires some surrender value. The facility of loan provides liquidity, and through it, a policyholder can fulfill any financial need without having to lift the policy prematurely.
6. Surrender Value: The policyholder can surrender the policy after one year due to necessity or a change in his financial requirements. On surrender, he is entitled to receive a guaranteed surrender value, a percentage of the single premium paid on the policy.
7. Tax Benefits: The LIC Single Premium Endowment Plan offers attractive tax benefits. The premium paid shall enjoy deduction under Section 80C of the Income Tax Act, while at maturity, proceeds are absolutely tax-free under Section 10(10D) provided the sum assured is at least 10 times the premium paid.
8. Term Flexibility: It allows any term between 10 and 25 years. This will enable the policyholder to choose a term that aligns with his financial planning.
Eligibility Criterion –
To avail the LIC Single Premium Endowment Plan, the following eligibility criteria must be met for the applicant:
Minimum Age at Entry- 90 days
Maximum Age at Entry- 65 years
Minimum Sum Assured- ₹50,000
The Sum Assured will have no maximum; it will only be limited to underwriting.
The policy term can be from as low as 10 years to up to 25 years.
Both the sum assured and amount of premium payable are determined by the age of the policyholder, the policy term selected, and the sum to be covered.
Benefits of the LIC Single Premium Endowment Plan –
1. Risk-Free Investment: While market-linked investment products are uncertain and therefore classified as unstable investments, the LIC Single Premium Endowment Plan offers guaranteed returns, thereby a safer way for conservative investors who prefer stability over high but uncertain returns.
2. The benefit of this plan is that it provides insurance as well as savings in one product. The sum assured benefits the family of the policyholder on his death at an untimely moment, and the maturity benefit helps him achieve long-term goals.
3. Single Premium: Where once the payment has removed the bother of paying premiums at intervals. This is ideal for applicants who wish to invest a one-time lump sum and enjoy the comfort that results from term cover all their lives without facing the future payment worry.
4. Liquidity Through Loan: The loan facility does not require the policyholder to liquidate the policy and forego future benefits in case of an emergency, but instead allows access to the funds.
5. Bonus Boosts Returns: Because the policy shares in the profits, the declared bonus by LIC adds to the net returns on the policy. Over the years, the bonuses accrued can add a handsome amount to the maturity proceeds.
6. Tax Relief: The premium paid is eligible for tax relief under Section 80C of the Income Tax Act, which reduces the policyholder’s tax liabilities. Additionally, the maturity amount is not taxed under Section 10(10D), and therefore, the plan is a tax-effective investment avenue.
How Does It Work?
The LIC Single Premium Endowment Plan works in a very simple and self-explanatory manner. Let’s take an illustration to understand the same:
– Age of the policyholder: 35 years
– Sum Assured: ₹10 lakh
– Policy Term: 15 years
– Single Premium: ₹6,25,000(Approx.)
If the policyholder pays a single premium of ₹6.25 lakh, for 15 years he is protected with a life insurance sum assured worth ₹10 lakh. On the other hand, if the policyholder dies within the term, then the nominee would be getting ₹10 lakh along with any added bonuses till the date of death.
If the policyholder survives the term of the policy, then he shall be paid out the sum assured of ₹10 lakh in addition to the reversionary bonuses declared by LIC for 15 years.
Let’s assume the LIC declares a bonus of ₹40 per thousand sum assured as a reversionary bonus. For 15 years, the bonus amounts to ₹6 lakh (₹40 × 1,000 × 15). So at the time of maturity, he shall be paid out ₹16 lakh – sum assured + bonuses.
Surrender and Loan Facilities –
Though this is a long-term investment scheme, LIC has provided for the option of surrendering the policy in the wake of any adverse condition. After one year from the beginning of the policy, the policy acquires a surrender value, and the policyholder can surrender the policy for a GSV or SSV, whichever is higher.
Furthermore, policyholders can avail of a loan against the policy once it has acquired a surrender value. The loan facility is likely to be helpful during any cash crunch and may even make the policy liquid without forcing it to be surrendered.
Why Choose LIC Single Premium Endowment Plan?
LIC Single Premium Endowment is the most suitable option for long-term savings combined with life insurance coverage. It is most ideal for:
1. Conservative Investors: Those who look for low-risk investment with guaranteed returns.
2. Lump Sum Amount Holders: Suitable to those individuals who have a large sum of money that they wish to invest in a secure manner without the payment of regular premium instalments.
3. Risk Averse Person: Individuals who desire to have life cover besides guaranteed accumulation of savings.
4. Tax Saving Investor: Those individuals who want to save taxes and ensure their financial security simultaneously.
Conclusion –
LIC single premium endowment plan is an ideal investment opportunity with a correct proportion of insurance and savings within one plan. It gives huge returns in the form of a guaranteed yield; the policy provides coverage during life, and tax benefits also make it a sweet proposition for risk-averse investors.
With the extra benefits of bonuses and loan facilities, the plan affords flexibility and security financially, thus giving peace of mind to both the policyholder and for his or her family.
Much like any kind of financial product, the best advice here is to re-evaluate the personal financial goals and – if appropriate – engage a financial advisor to ensure that this plan fits into your overall financial strategy.