TYPES OF LIFE INSURANCE Most of the products offered by Indian life insurers are developed and structured around these "basic" policies and are usually an extension or a combination of these policies.

University Degree Business and Administrative studies

INSURANCE

INTRODUCTION

Wherever there is uncertainty there is risk. The risk can’t be averted. It involves multiple losses. And so, risk is uncertainty of financial losses. We do not have any command on uncertainties. The insurance is a co- operative device to spread the loss. Further, it is also a social device to accumulate funds to meet uncertain losses. The main function of insurance is to provide protection against the possible chances of generating losses. It eliminates worries and miseries of losses at destruction of property and death. It also provides capital to the society as the accumulated funds are invested in the productive heads. The product of insurance benefits the industry, the business, an individual and a group of persons.

The Insurance regulatory development authority (IRDA) is the regulatory authority, which looks over the related aspects of the insurance business. The IRDA bill provides guidance for three levels of players- Insurance companies, Insurance Brokers and insurance agents.

1.1 BRIEF HISTORY OF INSURANCE SECTOR IN INDIA

The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta.

Some of the important milestones in the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.

LIFE INSURANCE OVERVIEW

3.1 INTRODUCTION

Life Insurance is the key to good financial planning. On one hand, it safeguards your money and on the other, ensures its growth, thus providing you with complete financial well being.

Life insurance is a contract between the insurer and insured. The person who insures his life is called the insured. The company which insures his life is called insurer. The insured is required to pay some amount of money in regular intervals. These payments are referred as premiums. According to the principle of life insurance a sum of assured money is paid to the insured incase the policy holder successfully makes all the payments and the policy comes to an end. On the contrary if the insured dies of an unexpected event the sum assured is paid to his dependents irrespective of full payment of the policy amount. The insurance company pays the money on death or after the policy period whichever occurs first.

There are three important factors as far as life insurance is concerned. They are as follows:

Premium
Nature of Policy
Benefits
Coverage

A person's need and income helps him to decide the amount of insurance premium. Once the person decides the premium he can select the policy that best suits him. The insured should also think about the benefits that he will receive before deciding to go for a particular policy. Life insurance covers the risks of loss due to the death of a person.

3.2 LIFE INSURANCE OBJECTIVES

Life insurance is probably one of the more difficult types of insurance to understand in terms of its purpose and objectives. Life insurance can provide protection to your family in two primary ways. First, it can provide your family with an inheritance in the event of your unexpected demise. This money can be used to pay off existing bills and relieve any financial stress that may be caused by your passing. Some life insurance policies provide a large lump-sum benefit, while others may be purchased only to cover the largest of your expenses such as your mortgage. Term life insurance typically provides the greatest benefit for the lowest premium.

On the other hand, some life insurance policies can also be purchased as an investment vehicle. These policies contain both a death benefit and an investment account. The money that you pay in premiums goes toward the cost of the policy and toward providing you with a savings account that can be invested in various types of securities like stocks, bonds and mutual funds.

3.4 ADVANTAGES OF LIFE INSURANCE

Risk Cover - Life today is full of uncertainties; in this scenario Life Insurance ensures that your loved ones continue to enjoy a good quality of life against any unforeseen event.
Planning for life stage needs - Life Insurance not only provides for financial support in the event of untimely death but also acts as a long term investment. You can meet your goals, be it your children's education, their marriage, building your dream home or planning a relaxed retired life, according to your life stage and risk appetite. Traditional life insurance policies i.e. traditional endowment plans, offer in-built guarantees and defined maturity benefits through variety of product options such as Money Back, Guaranteed Cash Values, Guaranteed Maturity Values.
Protection against rising health expenses - Life Insurers through riders or stand alone health insurance plans offer the benefits of protection against critical diseases and hospitalization expenses. This benefit has assumed critical importance given the increasing incidence of lifestyle diseases and escalating medical costs.
Builds the habit of thrift - Life Insurance is a long-term contract where as policyholder, you have to pay a fixed amount at a defined periodicity. This builds the habit of long-term savings. Regular savings over a long period ensures that a decent corpus is built to meet financial needs at various life stages.
Safe and profitable long-term investment - Life Insurance is a highly regulated sector. IRDA, the regulatory body, through various rules and regulations ensures that the safety of the policyholder's money is the primary responsibility of all stakeholders. Life Insurance being a long-term savings instrument, also ensures that the life insurers focus on returns over a long-term and do not take risky investment decisions for short term gains.
Assured income through annuities - Life Insurance is one of the best instruments for retirement planning. The money saved during the earning life span is utilized to provide a steady source of income during the retired phase of life.
Protection plus savings over a long term - Since traditional policies are viewed both by the distributors as well as the customers as a long term commitment; these policies help the policyholders meet the dual need of protection and long term wealth creation efficiently.
Growth through dividends - Traditional policies offer an opportunity to participate in the economic growth without taking the investment risk. The investment income is distributed among the policyholders through annual announcement of dividends/bonus.
Facilities of loans without affecting the policy benefits - Policyholders have the option of taking loan against the policy. This helps you meet your unplanned life stage needs without adversely affecting the benefits of the policy they have bought.
Tax Benefits-Insurance plans provide attractive tax-benefits for both at the time of entry and exit under most of the plans.

Under the Indian Income Tax Act, the following tax relief is available:

20 % of the premium paid can be deducted from your total income tax liability.
100 % of the premium paid is deductible from your total taxable income.

When these benefits are factored in, it is found that most polices offer returns that are or even better than other investment option.

Mortgage Redemption: Insurance acts as an effective tool to cover mortgages and loans taken by the policyholders so that, in case of any unforeseen event, the burden of repayment does not fall on the bereaved family
Administering the legacy for beneficiaries: Speculative or unwise expenses can quickly cause the proceeds to be squandered. Several policies have foreseen this possibility and provide for payments over a period of years or in a combination of installments and lump sum amounts.
Disability benefits: Death is not the only hazard that is insured; many polices also include disability benefits. Typically, these provide for waiver of future premiums and payment of monthly installments spread over certain time period.
Accidental death benefits: Many policies can also provide for an extra sum to be paid (typically equal to the sum assured) if death occurs as a result of accident.

TYPES OF LIFE INSURANCE

Most of the products offered by Indian life insurers are developed and structured around these "basic" policies and are usually an extension or a combination of these policies.

Types of Life Insurance Plans in LIC

4.1TERM INSURANCE POLICY

A term insurance policy is a pure risk cover for a specified period of time. What this means is that the sum assured is payable only if the policyholder dies within the policy term. For instance, if a person buys Rs 2 lakh policy for 15-years, his family is entitled to the money if he dies within that 15-year period.
What if he survives the 15-year period? Well, then he is not entitled to any payment; the insurance company keeps the entire premium paid during the 15-year period.
So, there is no element of savings or investment in such a policy. It is a 100 per cent risk cover. It simply means that a person pays a certain premium to protect his family against his sudden death. He forfeits the amount if he outlives the period of the policy. This explains why the Term Insurance Policy comes at the lowest cost.

Term Life Insurance Plan:

Term life insurance or term assurance is life insurance which provides coverage at a fixed rate of payments for a limited period of time, the relevant term. After that period expires coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments and/or conditions. If the insured dies during the term, the death benefit will be paid to the beneficiary. Term insurance is the least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.

TERM ASSURANCE PLANS:

Types:

ANMOL JEEVAN – I
TEMPORARY TERM ASSURANCE
AMULYA JEEVAN – I
CONVERTABLE TERM ASSURANCE

AMULYA JEEVAN – I

Benefits

Death Benefit: In case of unfortunate death of the Life Assured during the term of the policy, Sum Assured is payable, provided the policy is kept in force.

Maturity Benefit: Nil

MODE OF PAYMENT OF PREMIUMS

Premiums may be paid Yearly, Half-yearly or by Single Premium mode.

PREMIUM RATES

The tables below provide specimen tabular premiums for various age-term combinations for Rs. 1000/- Sum Assured

Annual Premium:

Table4.1-showing the Annual premium

Source-

Single Premium:

Table4.2-showing the Single premium

Source-

REBATES:

Large Sum Assured Rebates: The reduction in tabular premiums for different Sum Assured ranges are given below:

MODE EXTRA: 2.00% of tabular annual premium for half-yearly mode.

ELIGIBILITY CONDITIONS

Minimum age at entry - 18 Year (Completed)

Maximum age at entry - 60 years (nearest birthday)

Maximum age at maturity - 70 years

Policy term - 5 to 35 years

Minimum Sum Assured - Rs.25, 00,000/-

Maximum Sum Assured - No upper limit

(Sum Assured shall be in multiples of Rs.1, 00,000/-)

GRACE PERIOD:

A grace ...

This is a preview of the whole essay

Source-

Single Premium:

Table4.2-showing the Single premium

Source-

REBATES:

Large Sum Assured Rebates: The reduction in tabular premiums for different Sum Assured ranges are given below:

MODE EXTRA: 2.00% of tabular annual premium for half-yearly mode.

ELIGIBILITY CONDITIONS

Minimum age at entry - 18 Year (Completed)

Maximum age at entry - 60 years (nearest birthday)

Maximum age at maturity - 70 years

Policy term - 5 to 35 years

Minimum Sum Assured - Rs.25, 00,000/-

Maximum Sum Assured - No upper limit

(Sum Assured shall be in multiples of Rs.1, 00,000/-)

GRACE PERIOD:

A grace period of 15 days will be allowed for payment of yearly or half-yearly premiums.

PAID UP VALUE:

The policy shall not acquire any paid-up value.

REVIVAL

If the Policy has lapsed, it may be revived during the life time of the Life Assured, but within a period of 5 years from the date of first unpaid premium and before the date of maturity, on submission of proof of continued insurability to the satisfaction of the Corporation and the payment of all the arrears of premium together with interest at such rate as may be fixed by the Corporation from time to time compounding half-yearly.

SURRENDER VALUE:

No Surrender Value will be available under this plan.

LOAN:

No loan will be available under this plan.

COOLING OFF PERIOD:

If you are not satisfied with the “Terms and Conditions” of the policy, you may return the policy to us within 15 days.

EXCLUSIONS:

Suicide: This policy shall be void if the Life Assured commits suicide (whether sane or insane at that time) at any time on or after the date on which the risk under the policy has commenced but before the expiry of one year from the date of commencement of risk under the policy and the Corporation will not entertain any claim by virtue of this policy except to the extent of a third party’s bonafide beneficial interest acquired in the policy for valuable consideration of which notice has been given in writing to the branch where the Policy is being presently serviced (where the policy records are kept), at least one calendar month prior to death.

Section 45 of Insurance Act, 1938:

No policy of life insurance shall after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policyholder and that the policyholder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose.

Provided that nothing in this section shall prevent the insurer from calling for proof of age at any time if he is entitled to do so, and no policy shall be deemed to be called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life assured was incorrectly stated in the proposal.

Prohibition of Rebates (Section 41 of INSURANCE ACT, 1938):

(1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy nor shall any person taking out or renewing or continuing a policy accept any rebate except such rebates as may be allowed in accordance with the published prospectuses or tables of the insurer provided that acceptance by an insurance agent of commission in connection with a policy of life insurance taking out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this sub-section if at the time of such acceptance the insurance agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer.

(2) Any person making default in complying with the provision of this Section shall be punishable with a fine, which may extend to 500 rupees.

Note: Conditions apply for which please refer to the Policy document or contact our nearest Branch Office.

4.2WHOLE LIFE POLICY

As the name suggests, a Whole Life Policy is an insurance cover against death, irrespective of when it happens.
Under this plan, the policyholder pays regular premiums until his death, following which the money is handed over to his family.

This policy, however, fails to address the additional needs of the insured during his post-retirement years. It doesn't take into account a person's increasing needs either. While the insured buys the policy at a young age, his requirements increase over time. By the time he dies, the value of the sum assured is too low to meet his family's needs. As a result of these drawbacks, insurance firms now offer either a modified Whole Life Policy or combine in with another type of policy.

WHOLE LIFE PLANS:

Types:

WHOLE LIFE WITH PROFIT
LIMITED PAYMENT WHOLE LIFE
SINGLE PREMIUM WHOLE LIFE
JEEVAN TARANG

JEEVAN TARANG

Introduction:

This is a with-profits whole of life plan which provides for annual survival benefit at a rate of 5½ % of the Sum Assured after the chosen Accumulation Period. The vested bonuses in a lump sum are payable on survival to the end of the Accumulation Period or on earlier death. Further, the Sum Assured, along with Loyalty Additions, if any, is payable on survival to age 100 years or on earlier death.

Accumulation Period:

The plan offers three Accumulation periods – 10, 15 and 20 years. A proposer may choose any of them.

Payment of Premium:

Premiums can be paid regularly at yearly, half-yearly, quarterly or monthly intervals or through salary deductions over the Accumulation Period. Alternatively, a Single Premium can be paid on commencement of a policy.

Sample Premium Rates:

The tables below provide tabular premiums for various age-term combinations for Rs. 1000/- Sum Assured.

Table4.3-showing the regular premium

Source:

Table4.4-showing the single premium

Source:

Participation in Profits:

Policies under this plan shall participate in profits of the Corporation. During the accumulation period policies shall be entitled to receive simple reversionary bonuses which will be payable on survival to the end of the accumulation period or on earlier death. After the accumulation period, policies will be entitled to receive a Loyalty Addition payable on maturity or earlier death. The amount of simple reversionary bonus and Loyalty Addition will depend on the experience of the Corporation.

Survival Benefits:

On survival to the end of the selected accumulation period: Vested reversionary bonuses in a lump sum will be payable.
On survival to the end of each year after the accumulation period: 5½% of the Sum Assured will be payable. The first survival benefit will be payable on survival to one year after the end of the accumulation period.

Maturity Benefit:

On survival to the policy anniversary coinciding with or immediately following the completion of age 100 years, the Sum Assured along with Loyalty Addition, if any, will be payable.

Death Benefit:

In case of death of the Life Assured during the Accumulation Period, the Sum Assured along with vested reversionary bonuses is payable.
In case of death of the Life Assured any time after the Accumulation Period, the Sum Assured along with Loyalty Addition, if any is payable.

OPTIONAL RIDERS AVAILABLE DURING THE ACCUMULATION PERIOD:

Accident Benefit Rider Option (Allowed for Regular Premium policies only):

Accident Benefit Option will be available under the plan by the payment of additional premium. Accident Benefit Rider shall be available for an amount not exceeding the Sum Assured under the basic plan subject to overall limit of Rs.50 lakh taking all existing policies of the life assured under individual as well as group schemes taken with Life Insurance Corporation of India and other insurance companies and the Accident Benefit Rider Sum Assured under the new proposal into consideration.

This benefit is available under Regular Premium policies only and it is not available under single premium policies.

In case of accidental death, the Accident benefit sum assured will be payable as lump sum along with the death benefit under the basic plan. In case of accidental disability arising due to accident (within 180 days from the date of accident), an amount equal to the Accident Benefit sum assured will be paid in monthly installments spread over 10 years or upto death or maturity, if earlier, and all future premiums under the policy will be waived.

The disability due to accident should be total and such that the life assured is unable to carry out any work to earn the living. Following disabilities due to accidents are covered:

Irrevocable loss of the entire sight of both eyes or
Amputation of both hands at or above the wrists or
Amputation of both feet at or above ankles or
Amputation of one hand at or above the wrist and one foot at or above the ankle

No benefit will be paid if accidental death or disability arises due to accident in case of:

Intentional self-injury, attempted suicide, insanity or immorality of the life assured is under the influence of intoxicating liquor, drug or narcotic
Engagement in aviation or aeronautics other than that of a passenger in any aircraft
Injuries resulting from riots, civil commotion, rebellion, war, invasion, hunting, mountaineering, steeple chasing or racing of any kind
Accident resulting from committing any breach of law
Accident arising from employment in armed forces or military services or police organization

Other riders available under this plan are:

Term Assurance Rider Option
Critical Illness Rider Option

All three optional rider benefits mentioned above shall be available during accumulation period only.

PAID-UP VALUE:

If after at least three full years' premiums have been paid and any subsequent premium be not duly paid, this policy shall not be wholly void, but shall subsist as a paid-up policy for an amount equal to the paid-up value. The paid-up value as shall bear the same ratio to the full Sum Assured as the number of premiums actually paid shall bear to the total number of premiums originally stipulated in the policy. The policy so reduced shall thereafter be free from all liabilities for payment of the within mentioned premium, but shall not be entitled to the future bonuses. The existing vested reversionary bonuses, if any, shall remain attached to a paid-up policy. This paid up value along with the vested reversionary bonuses shall be payable on the survival of the Life Assured to the end of the Accumulation Period or on his/her prior death. No survival benefit shall be payable under paid up policies.

These provisions do not apply to the Accident Benefit, Term Assurance and Critical Illness rider options, as these riders do not acquire any paid-up value.

GUARANTEED SURRENDER VALUE:

• During Accumulation Period:

For Single Premium policies – After completion of at least one policy year, 90% of the Single Premium received, excluding premiums for optional riders and extras, if any, will be payable.

The cash value of any vested reversionary bonuses, if any, will also be payable

This is irrespective of the age of the Life Assured.

For Regular Premium policies – After completion of at least three policy years and at least three full years’ premiums have been paid, 30% of the total amount of premiums paid excluding the premiums for the first year and all premiums in respect of optional benefits and extras will be payable. However, if the age at entry of the Life Assured is less than or equal to 12 years, the guaranteed surrender value will be equal to

• Before commencement of risk: 90% of the total amount of premiums (excluding premiums paid for the first year and any extras) paid.

• After commencement of risk: 90% of the total premiums (excluding premium for the first year and any extras) paid before commencement of risk and 30% of premiums paid (excluding any extras) after the commencement of risk.

Premiums for Accident Benefit rider cover, Term Assurance rider cover and Critical Illness rider cover will be excluded.

The cash value of any vested reversionary bonuses, if any, will also be payable.

•After Accumulation Period: This will be 85% of the Basic Sum Assured.

OTHER BENEFITS:

• Loan: Loan facility is available under this plan. However, the rate of interest would be determined from time to time by the Corporation. Presently the rate of interest is 9 % pa payable half-yearly.

• Grace period: A grace period of one month but not less than 30 days will be allowed for payment of yearly, half-yearly or quarterly premiums and 15 days for monthly premiums.

• Cooling-off period: If you are not satisfied with the terms and conditions of the policy, you may return the policy to us within 15 days.

• Revival: Subject to satisfactory evidence of continued insurability, a lapsed policy can be revived during the lifetime of the Life Assured but before the expiry of the Accumulation Period within a period of five years from the due date of first unpaid premium by paying arrears of premium together with interest. The rate of interest applicable will be as fixed by the Corporation from time to time.

ELIGIBILITY CONDITIONS FOR THIS PLAN:

Ages at entry: 0 to 60 years nearest birthday

Accumulation periods available: 10, 15 and 20 years

Maximum age at which premium payment ceases: 70 years nearest birthday

Age up to which life cover available: 100 years

Minimum age at end of Accumulation Period: 18 years last birthday

Premium paying terms: Single Premium and, in case of regular premiums, equal to the accumulation period, i.e. 10, 15 and 20 years

Modes of premium payment: Yearly, Half Yearly, Quarterly, Monthly, SSS and Single Premium

Sum Assured: Rs.1 lakh and over in multiples of Rs.5, 000/-.

ELIGIBILITY CONDITIONS FOR ACCIDENT BENEFIT RIDER (Allowed under Regular Premium policies only):

Ages at entry: 18 to 60 years nearest birthday

Maximum age at which premium payment ceases: 70 years nearest birthday

Age up to which life cover available: 70 years

Minimum age at end of Accumulation Period: 18 years last birthday

Premium paying terms: Equal to the accumulation period, i.e. 10, 15 and 20 years

Modes of premium payment: Yearly, Half Yearly, Quarterly, Monthly, SSS and Single Premium

Sum Assured: Rs.25, 000 to Rs.50 lakh, considering all Accident Benefit Sums Assured under individual and group policies and Accident Benefit Rider Sum Assured under new proposals into consideration. The Sum Assured can be in multiples of Rs.5,000/-.

Availability of Rider: During the chosen Accumulation Period.

REBATES/EXTRA FOR MODE OF PREMIUM PAYMENT AND HIGH SUM ASSURED:

• Mode Rebate:

Yearly mode: 2% of tabular Premium

Half-yearly mode: 1% of the tabular premium

Quarterly: NIL

In case of monthly mode other than SSS, an additional amount of 5% of tabular premium will be charged.

• High Sum Assured Rebates:

For Annual premium

Rs.1.25%o Sum Assured for Sum Assured Rs 2 lakh and over;

Rs. 2.25%o Sum Assured for Sum Assured Rs 5 lakh and over.

For Single premium

Rs.7.50%o Sum Assured for Sum Assured Rs 2 lakh and over;

Rs.12.50%o Sum Assured for Sum Assured Rs 5 lakh and over.

EXCLUSIONS:

This policy shall be void if the Life Assured commits suicide (whether sane or insane at the time) at any time on or after the date on which the risk under the policy has commenced but before the expiry of one year from the date of commencement of risk under the policy and the Corporation will not entertain any claim by virtue of this Policy except to the extent of a third party's bonafide beneficial interest acquired in the policy for valuable consideration of which notice has been given in writing to the office to which premiums under this policy were paid last, at least one calendar month prior to death.

4.3ENDOWMENT POLICY

A type of life insurance that is payable to the insured if he/she is still living on the policy's maturity date, or to a beneficiary otherwise.

Meaning:

Endowment insurance plans provide life insurance cover for a specific period. The insured can get the sum assured plus any bonus or guaranteed additions that may accrue during the policy term.

Combining risk cover with financial savings, endowment policies is the most popular policies in the world of life insurance.

In an Endowment Policy, the sum assured is payable even if the insured survives the policy term.
If the insured dies during the tenure of the policy, the insurance firm has to pay the sum assured just as any other pure risk cover.
A pure endowment policy is also a form of financial saving, whereby if the person covered remains alive beyond the tenure of the policy; he gets back the sum assured with some other investment benefits.

In addition to the basic policy, insurers offer various benefits such as double endowment and marriage/education endowment plans. The cost of such a policy is slightly higher but worth its value.

ENDOWMENT PLANS

Types:

ENDOWMENT WITH PROFIT
ENDOWMENT PLUS
LIMITED PAYMENT ENDOWMENT
BHAVISHYA JEEVAN
NEW JANARAKSHA
JEEVAN ANAND
JEEVAN MITRA
JEEVAN MITRA TRIPLE COVER
JEEVAN AMRIT

JEEVAN ANAND

Suitability:

This policy is a combination of a whole life plan and with profit endowment plan. It is suitable for people who wish to provide for their dependents, insured sums,limit the premium payment term to their earning period and at the same time provide for their old age.

Salient Features

The plan combines the virtues of both whole life plan and endowment plan
Under the plan, premiums are limited to the term chosen and benefits are payable on the date of maturity. But the insurance cover on the life assured continues till death, like a whole life policy
Bonus accrues during the premium paying term and is payable at the end of the premium paying term or on earlier death along with Final Additional Bonus. No Bonus is paid on death after the premium paying term.
Double Accident Benefit is available during the premium paying term and thereafter up to age 70 wherein additional sum assured is payable on death due to an accident. This benefit is built in and no additional premiums need to be paid. Maximum Accident Cover available under this plan will be Rs. 5 lakh (this limit excludes accident benefit taken under other plans)
Premium payment can be Monthly, Quarterly, Half yearly, Yearly and SSS

Benefits

On Survival to maturity

Full sum assured along with Bonus is payable. Policy does not cease and insurance cover continues till death.

On Death within the term:

Full sum assured along with the bonus is payable and policy ceases

On death after the term of the policy:

Full sum assured is payable

Other Conditions

Minimum Sum Assured: Rs.100,000

Minimum premium must be Rs.800 per annum
Minimum age at entry: 18 years
Premium paying term: 5-57 years
Maximum age at entry: 65 years normally but 60 years for single premium policy

4.4MONEY BACK POLICY

These policies are structured to provide sums required as anticipated expenses (marriage, education, etc) over a stipulated period of time. With inflation becoming a big issue, companies have realized that sometimes the money value of the policy is eroded. That is why with-profit policies are also being introduced to offset some of the losses incurred on account of inflation.
A portion of the sum assured is payable at regular intervals. On survival the remainder of the sum assured is payable.
In case of death, the full sum assured is payable to the insured.
The premium is payable for a particular period of time.

MONEYBACK PLANS

Types:

MONEYBACK WITH PROFIT
JEEVAN SURABHI
BIMA BACHAT PLAN

MONEY BACK POLICY

Suitability

This plan is suitable for people who require lump sum amounts in future to meet specific expenses such as children's education or marriage. At the same time, the policy provides insurance protection for the family as well as old age provision

Salient Features

A policy where lump sum amounts are paid to the life assured at periodic intervals on survival
In case of death of the life assured within the term, the total sum insured is paid to the nominee, irrespective of earlier survival benefits
Bonus is payable under this scheme
Premiums are to be paid regularly to get survival benefits
Premiums cease at death or on expiry of term whichever is earlier
This plan can be availed of for terms 20 or 25 years

BenefitS

On Survival

Table4.5-showing benefits on survival

Source:

On Death:

Full sum assured is payable in the event of the death of the life assured within the term, without any deduction of earlier survival benefits.
For example, suppose a person takes a Rs. 1, 00,000 policies for 20 years. At the end of the 5th and 10th year he receives Rs. 20,000 each as survival benefit. If he happens to die in the 12h year, the nominee of the life assured will receive full Rs. 1, 00,000, irrespective of the earlier benefits of Rs. 40,000.

Other Conditions

Minimum amount of Sum Insured - Rs. 40,000
Minimum premium must be Rs.800 per annum
Minimum age at entry-13 years
Maximum age at entry
20 year policy - 50 years
25 year policy - 45 years
Bonus additions to the policy are calculated for full sum assured. They are payable only along with final maturity benefit on date of maturity or on death, whichever is earlier
Loans will be granted under these policies

4.5ANNUITIES AND PENSION

In an annuity, the insurer agrees to pay the insured a stipulated sum of money periodically. The purpose of an annuity is to protect against risk as well as provide money in the form of pension at regular intervals.

Over the years, insurers have added various features to basic insurance policies in order to address specific needs of a cross section of people.

Definition:

A qualified retirement plan set up by a corporation, labor union, government, or other organization for its employees. A business could offer profit-sharing plan, a stock bonus plan, an Employee Stock Ownership Plan (ESOP), a thrift plan, a target benefit plan, a money purchase pension plan, or a defined benefit plan.

Pension Plan:

Pension Plans are Individual Plans that gaze into your future and foresee financial stability during your old age. These policies are most suited for senior citizens and those planning a secure future, so that you never give up on the best things in life.

PENSION PLANS

Types:

JEEVAN NIDHI
JEEVAN AKSHAY - VI
PENSION PLUS
NEW JEEVAN DHARA – I
NEW JEEVAN SURAKSHA - I

NEW JEEVAN SURAKSHA – I

Product summary:

These are Deferred Annuity plans that allow the policyholder to make provision for regular income after the selected term.

Premiums:

Premiums are payable yearly, half-yearly, quarterly, monthly or through Salary deduction, as opted by you, throughout the term of the policy or till earlier death. Alternatively, the premium may be paid in one lump sum (single premium).

Tax Benefits:

Tax relief under Section 80ccc is available on premiums paid under New Jeevan Suraksha I . The premiums paid under New Jeevan Dhara I qualify for tax relief under Section 88.

Bonuses:

These are with-profit plans and participate in the profits of the Corporation’s annuity / pension business. Policies get a share of the profits in the form of bonuses. Simple Reversionary Bonuses are declared per thousand Sum Assured annually at the end of each financial year. Once declared, they form part of the guaranteed benefits of the plan. Final (Additional) Bonuses may also be payable provided policy has run for a certain minimum period.

Benefits

Death Benefit:

On death of the Life Assured during the term of the policy the basic premiums paid, excluding any rider premiums or extra premiums, up to the date of death accumulated with interest at such rates as decided by the Corporation will be payable to the nominee. Currently, the interest rate is 3%, 4% or 5 % if the death occurs within the first 10 years, 20 years or thereafter respectively.

Maturity Benefit:

At maturity the policyholder can encase up to a maximum 25% of the maturity proceeds as a tax-free lump sum. The balance should be compulsorily converted to an annuity at the rates applicable at the time of maturity of the policy. The policyholder has the choice of opting for any one of 5 annuity options. The annuity options available are

Annuity payable for remainder of life
Annuity payable for life with guaranteed period of 5, 10, 15 or 20 years
Joint life and last survivor annuity to the annuitant and his/ her spouse under which annuity payable to the spouse on death of the purchaser will be 50% of that payable to the annuitant
Life annuity with a return of purchase price on death of the annuitant
Life annuity increasing at a simple rate of 3% per annum

Supplementary/Extra Benefits:

These are the optional benefits that can be added to your basic plan for extra protection/option. An additional premium is required to be paid for these benefits.

Surrender Value:

Buying a life insurance contract is a long-term commitment. However, surrender value is available on the plan on earlier termination of the contract.

Guaranteed Surrender Value:

The policy may be surrendered after it has been in force for 2 years or more but before the vesting date. The guaranteed surrender value is 90% of the basic premiums paid excluding the first year’s premium. In case of a single premium policy the guaranteed surrender value is allowed after 2 years from the date of commencement of the policy.

Corporation’s policy on surrenders:

In practice, the company will pay a Special Surrender Value – which is equal to or higher than the Guaranteed Surrender Value. The benefit payable on surrender reflects the discounted value of the reduced claim amount that would be payable on death or at maturity. This value will depend on the duration for which premiums have been paid and the policy duration at the date of surrender. In some circumstances, in case of early termination of the policy, the surrender value payable may be less than the total premium paid.

The Corporation reviews the surrender value payable under its plans from time to time depending on the economic environment, experience and other factors.

Note: The above is the product summary giving the key features of the plan. This is for illustrative purpose only. This does not represent a contract and for details please refer to your policy document.

4.6UNIT-LINKED INSURANCE PLAN

A unit-linked insurance plan (ULIP) is a type of life insurance where the cash value of a policy varies according to the current net asset value of the underlying investment assets. It allows protection and flexibility in investment, which are not present in other types of life insurance such as whole life policies. The premium paid is used to purchase units in investment assets chosen by the policyholder.

ULIP came into play in the 1960s and is popular in many countries in the world.

As times progressed the plans were also successfully mapped along with life insurance need to retirement planning. In today's times, ULIP provides solutions for insurance planning, financial needs, and many types of financial planning including children’s marriage planning.

In India investments in ULIP are covered under Section 80C of IT Act. However, the concept of having an investment and insurance by the same instrument was challenged by the market regulator SEBI which took up the matter to the Supreme Court of India .The Indian government brought down curtains on the two-month long tussle between the regulators by ruling that Unit-linked Insurance Products (Ulips) will be governed by the Insurance Regulatory and Development Authority (IRDA).

UNIT LINK PLAN

Types:

ENDOWMENT PLUS
PENSION PLUS

ENDOWMENT PLUS

IN THIS POLICY, THE INVESTMENT RISK IN INVESTMENT PORTFOLIO IS BORNE BY THE POLICYHOLDER

This is a unit linked Endowment plan which offers investment cum insurance cover during the term of the policy. You can choose the level of insurance cover within the limits, which will depend on the mode and level of premium you agree to pay.

You have a choice of investing your premiums in one of the four types of investment funds available. Premiums paid after deduction of allocation charge will purchase units of the Fund type chosen. The Unit Fund is subject to various charges and value of units may increase or decrease, depending on the Net Asset Value (NAV).

Payment of Premiums: You may pay premiums regularly at yearly, half-yearly, quarterly or monthly (through ECS mode only) intervals over the term of the policy. Alternatively, a Single premium can be paid.

A grace period of 30 days will be allowed for payment of yearly or half-yearly or quarterly premiums and 15 days for monthly (through ECS) premiums.

Eligibility Conditions And Other Restrictions:

(a) Minimum Age at entry - 7 (age last birthday)

(b) Maximum Age at entry - 60 years (age nearer birthday)

(d) Maximum Maturity Age - 70 years (age nearer birthday)

(e) Policy Term - 10 to 20 years

(f) Minimum Premium -

Regular premium (other than monthly (ECS) mode): Rs. [20,000] p.a.

Regular premium (for monthly (ECS) mode): Rs. [1,750] p.m.

Single premium: Rs. [30,000]

(g) Maximum Premium -

Regular premium: Rs. [1, 00,000] p.a.

Single premium: No Limit

(h) Sum Assured under the Basic Plan -

Minimum Sum Assured:

Regular Premium policies: (Policy Term +1) times the annualized premium

Single Premium:

For age at entry of below 45 years: 1.25 times of the single premium

For age at entry of 45 years and above: 1.10 times of the single premium

Maximum Sum Assured:

Regular Premium policies:

30 times of the annualized premium if age at entry is upto 45 years

25 times of the annualized premium if age at entry is 46 to 60 years

Single Premium Policies:

If Critical Illness Benefit Rider is opted for:

5 times the Single premium if age at maturity is upto 55 years.

3 times the Single premium if age at maturity is 56 to 60 years.

If Critical Illness Benefit Rider is not opted for:

5 times the Single premium if age at maturity is upto 65 years.

3 times the Single premium if age at maturity is 66 to 70 years.

Where the minimum Sum Assured is not in the multiples of Rs. 5,000, it will be rounded off to the next multiple of Rs. 5,000. Annualized Premiums shall be payable in multiple of Rs. 1,000 for other than ECS monthly. For monthly (ECS), the premium shall in multiples of Rs. 250/-.

Charges under the Plan:

Premium Allocation Charge:

This is the percentage of the premium deducted towards charges from the premium received. The balance constitutes that part of the premium which is utilized to purchase (Investment) units for the policy. The allocation charges are as below:
For Single premium policies: 3.3%
For Regular premium policies:

Table4.6-showing regular premium allocation charges

Source:

Charges for Risk Covers:

Mortality Charge – This is the cost of life insurance cover which is age specific and will be taken every month. The life insurance cover is the difference between Sum Assured under Basic plan and the Fund Value after deduction of all other charges.

Table4.7- The charges per Rs. 1000/- life insurance cover for some of the ages in respect of a healthy life are as under:

Source:

Critical Illness Benefit rider Charge – This is the cost of Critical Illness Benefit rider (if opted for). These are age specific and will be taken every month.

Table4.8-The charges per Rs. 1000/- Critical Illness Rider Sum Assured per annum for some of the ages in respect of a healthy life are as under:

Source:

Accident Benefit charge - It is the cost of Accident Benefit rider (if opted for) and will be levied every month at the rate of Rs. 0.50 per thousand Accident Benefit Sum Assured per policy year.

Other Charges:

The following charges shall be deducted during the term of the policy:

Policy Administration charge - Rs. 30/- per month during the first policy year and Rs 30/- per month escalating at 3% p.a. thereafter, throughout the term of the policy shall be levied.
Fund Management Charge –It is a charge levied as a percentage of the value of units at following rates:

0.50% p.a. of Unit Fund for “Bond” Fund

0.60% p.a. of Unit Fund for “Secured” Fund

0.70% p.a. of Unit Fund for “Balanced” Fund

0.80% p.a. of Unit Fund for “Growth” Fund

Fund Management Charge shall be appropriated while computing NAV.

Switching Charge – This is a charge levied on switching of monies from one fund to another. Within a given policy year 4 switches will be allowed free of charge. Subsequent switches in that year shall be subject to a switching charge of Rs. 100 per switch.
Bid/Offer Spread – Nil.

Table4.9-Discontinuance Charge – The discontinuance charge for regular premium policies is as under:

Source:

AP – Annualised Premium

FV – Policyholder’s Fund Value on the date of discontinuance

There shall not be any discontinuance charge under Single Premium.

Service Tax Charge – A service tax charge, if any, will be as per the service tax laws and rate of service tax as applicable from time to time.
Miscellaneous Charge – This is a charge levied for an alteration within the contract, such as reduction in sum assured, change in premium mode and grant of Accident Benefit after the issue of the policy. An alteration may be allowed subject to a charge of Rs. 50/-.

Right to revise charges:

The Corporation reserves the right to revise all or any of the above charges except the Premium Allocation charge and Mortality charge. The modification in charges will be done with prospective effect with the prior approval of IRDA.

Although the charges are reviewable, they will be subject to the following maximum limit:

Policy Administration Charge

Rs. 60/- per month during the first policy year and Rs. 60/- per month escalating at 3% p.a. thereafter, throughout the term of the policy

Fund Management Charge: The Maximum for each Fund will be as follows:

Bond Fund: 1.00% p.a. of Unit Fund
Secured Fund: 1.10% p.a. of Unit Fund
Balanced Fund: 1.20% p.a. of Unit Fund
Growth Fund: 1.30% p.a. of Unit Fund

Critical Illness Benefit charges shall not exceed by more than 200% of the current rate.
Switching Charge shall not exceed Rs. 200/- per switch.
Miscellaneous Charge shall not exceed Rs. 100/- each time when an alteration is requested.

In case the policyholder does not agree with the revision of charges the policyholder shall have the option to withdraw the Policyholder’s Fund Value.

Discontinuance of Premiums:

If you fail to pay premiums under the policy within the days of grace, a notice shall be sent to you within a period of fifteen days from the date of expiry of grace period to exercise one of the following options within a period of thirty days of receipt of such notice:

Revival of the policy, or
Complete withdrawal from the policy

During the notice period of 30 days, the policy shall be treated as in force and the charges for Mortality, Accident Benefit and / or Critical Illness Benefit cover, if any, shall be taken in addition to other charges, by cancelling an appropriate number of units out of the Policyholder’s Fund Value. The cover shall continue till the date of discontinuance of the policy (i.e. till the date on which the intimation is received from the policyholder for complete withdrawal of the policy or till the expiry of the notice period).

If you do not exercise any option within the stipulated period of 30 days, you shall be deemed to have exercised the option of complete withdrawal from the policy.

The benefits payable under the policy during the notice period shall be same as that under an in force policy, except Partial Withdrawal, which shall not be allowed if all due premiums have not been paid.

The benefits payable when you exercise the option for complete withdrawal or you do not exercise any option during the notice period shall be as under:

If the policy is discontinued within 5 years from the date of commencement of the policy: If you exercise the option for complete withdrawal from the policy, or you do not exercise the option within the period of 30 days of receipt of notice, then the policy shall be compulsorily terminated. The Policyholder’s Fund Value as on the date of discontinuance of policy after deducting the Discontinuance Charge shall be converted into monetary terms as specified below and Proceeds of the discontinued policy as specified below shall be payable after completion of 5 years from the date of commencement of the policy.

If the policy is discontinued after 5 years from the date of commencement of the policy: If you exercise the option for complete withdrawal from the policy, or you do not exercise the option within the period of 30 days of receipt of notice, then the policy shall be compulsorily terminated and Policyholder’s Fund value shall be payable.

Method of calculation of Monetary amount and Proceeds of the Discontinued Policy:

The conversion to monetary amount shall be as under:

The NAV on the date of application for surrender or as on the date of discontinuance of the policy (in case of complete withdrawal of the policy), as the case may be, multiplied by the number of units in the Policyholder’s Fund Value as on that date will be the monetary amount.

The Proceeds of the Discontinued Policy shall be calculated as under:

The monetary amount calculated as above shall be transferred to the Discontinued Policy Fund. This Fund will earn a minimum interest rate of 3.5% p.a. from the date of discontinuance of the policy to the date of completion of 5 years from the commencement of the policy. In case of death of the life assured, the interest shall accrue from the date of discontinuance of the policy to the date of booking of liability. The Proceeds of the discontinued policy shall be the monetary amount plus the interest accrued on the Discontinued Policy Fund.

Compulsory termination:

If the balance in the Policyholder’s Fund Value, at any time is

Not sufficient to recover the relevant charges, in case of partial withdrawal of units after the fifth policy anniversary, or
Less than or equal to the loan outstanding along with interest thereon, if any loan has been taken under the policy,

The policy shall compulsorily be terminated and the balance amount in the Policyholder’s Fund Value, if any, shall be refunded to the policyholder.

Other Features:
Guarantee of interest rate on Discontinued Policy Fund:

A guaranteed minimum interest rate of 3.5% p.a. shall be credited to the Discontinued Policy Fund constituted by the fund value of all discontinued policies.

Partial Withdrawals: Youmay encash the units partially after the fifth policy anniversary and provided all due premiums have been paid subject to the following:

In case of minors, partial withdrawals shall be allowed from the policy anniversary coinciding with or next following the date on which the life assured attains majority (i.e. on or after 18th birthday).
Partial withdrawals may be in the form of fixed amount or in the form of fixed number of units.
For 2 years’ period from the date of withdrawal, the Sum Assured under the Basic plan shall be reduced to the extent of the amount of partial withdrawals made.
Partial withdrawal will be allowed subject to a minimum balance of two annualized premiums in the Policyholder’s Fund Value in case of regular premium policies and 25% of the single premium paid in case of single premium policies.
Partial Withdrawal shall not be allowed if loan is availed under the policy.

Switching: You can switch between the four fund types for the entire Fund Value during the policy term subject to switching charges, if any.

Increase / Decrease of risk covers: No increase of covers will be allowed under the plan. You can, however, decrease the risk covers, without reducing the level of premium, once in a year during the Policy term, provided all due premiums under the Policy have been paid.

Revival: If due premium is not paid within the days of grace, a notice shall be sent to you within a period of fifteen days from the date of expiry of grace period to exercise the option for revival within a period of thirty days of receipt of such notice. If you exercise the option to revive the policy, then the arrears of premium without interest shall be required to be paid.

The Corporation reserves the right to accept the revival at its own terms or decline the revival of a policy.

Irrespective of what is stated above, if the Policyholder’s Fund Value is not sufficient to recover the charges during the notice period, the policy shall terminate and thereafter revival will not be allowed.

Settlement Option: When the policy comes for maturity, you may exercise “Settlement Option” one month prior to the date of maturity and receive the policy money in installments spread over a period of not more than five years from the date of maturity. There shall not be any life cover during this period and no charges other than Fund Management Charge shall be deducted. The value of installment payable on the date specified shall be subject to investment risk i.e. the NAV may go up or down depending upon the performance of the fund.

Reinstatement:

A policy once surrendered cannot be reinstated.

Risks borne by the Policyholder:

LIC’s Endowment Plus is a Unit Linked Life Insurance products which is different from the traditional insurance products and are subject to the risk factors.
The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions.
Life Insurance Corporation of India is only the name of the Insurance Company and LIC’s Endowment Plus is only the name of the unit linked life insurance contract and does not in any way indicate the quality of the contract, its future prospects or returns.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document of the insurer.
The various funds offered under this contract are the names of the funds and do not in any way indicate the quality of these plans, their future prospects and returns.
All benefits under the policy are also subject to the Tax Laws and other financial enactments as they exist from time to time.

Cooling off period:

If you are not satisfied with the “Terms and Conditions” of the policy, you may return the policy to us within 15 days. The amount to be refunded in case the policy is returned within the cooling-off period shall be determined as under:

Value of units in the Policyholder’s Fund

Plus unallocated premium

Plus Policy Administration charge deducted

Less charges @ Rs.0.20per thousand Sum Assured under Basic plan

Less Actual cost of medical examination and special reports, if any.