LIC's Single Premium endowment Plan

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LIC has introduced Single Premium Endowment Plan. (Plan No:  817).  It offers rebate on higher sum assured. For low sum assured, return turns out to be very low. Higher the sum assured is, higher will be the maturity amount.  As plan also offers tax deduction on investment amount and tax exemption on maturity, it is good for someone who wants to invest with high sum assured. Returns on low sum assured is very low and should be avoided.  Your money will   be locked for entire tenure and surrender will bring down return considerably.



Basic terms and conditions:
Entry Age: 90days to 65 years
Min Basic Sum Assured: Rs. 50, 000
Term: 10 - 25 years.
Loan facility available after completion of 1 year.
Maturity benefit: Sum Assured + Bonus + Final Additional Bonus.
Death benefit: Sum Assured + Bonus + Final Additional Bonus
In case age is less than 8 years, the risk will commence after completion of 2 policy years or completion of 8 years of age, whichever is earlier. In such cases death benefit is Return of single premium, excluding service tax and extra premium.

Service tax rate is 3.09% of single premium.

High sum assured rebate on premium amount:
Sum Assured
Rebate %
3 Lac and above
30% of SA
2Lac to 295000
25% of SA
1Lac to 195000
18% of SA
50000 to 95000
Nil

Following is illustration for 30-year-old person with term of 15 years

Sum Assured
Premium per ' 000
Rebate
Premium
50000
642.6
0
32130
100000
642.6
18% of SA
46260
200000
642.6
25% of SA
78520
300000
642.6
30% of SA
102780

 Maturity benefit:

Maturity SA
Bonus
FAB
Total Maturity
50000
28500
0
78500
100000
57000
0
157000
200000
114000
0
314000
300000
171000
0
471000

 The higher the sum assured, better the return would be. The above calculation does not consider 3.09% service tax on total premium amount. Bonus rate of 38 rupees per 1000 SA is considered. Please visit  lic illustration for more details on premium rates and bonus calculation. As can be seen in the illustration present at lic website, surrender will bring down the return amount considerably.

Though it is not fair to compare it with PPF as it offers insurance cover, however with PPF rates are now linked to inflation, I will try to provide some illustration if this policy is better than PPF. For those who have exhausted 1 Lac limit on their PPF, this policy seems attractive provided they have good amount to invest.

Surrender:
Guaranteed Surrender Value:
1st Year: 70% of premium, excluding service tax and extra premium
Second year onwards: 90% of premium, excluding service tax and extra premium.
In addition, surrender value of bonus amount will also be paid.

 Special Surrender Value:
Discounted value of Sum Assured and vested simple reversionary bonuses. Policy can be surrender anytime during the policy term. Higher of GSV or SSV will be paid.

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1 comments:

A very well designed plan and catering all the aspect of the customer and insurance co. also

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