Insurance

LIC Premium Endowment Plan offers “Limited Returns”

LIC has long been a household name among Indian families. Over years, generations after generations have bought policies from this company, giving to the trust that they’ve maintained over the years.

However, very recently, people have started moving away from LIC endowment plans alleging small returns for the premiums made. Despite technically being right about the returns, loyal LIC customers still have faith over this trustworthy company. If you were planning to buy the LIC Premium Endowment plan, perhaps a closer look at what it is offering will make you be certain of your decision.

What Is The LIC Endowment Plan About?

The reason why people have started taking notice of this plan is because it offers a unique type of insurance. Under the LIC Endowment Plan, you can choose to pay premiums for terms which are as long as you prefer, and still get coverage for the entire term of the LIC policy.

Specifically, you can opt for one of the following options from the following list. Considering there are 6 entries into this list, you can be sure that at least one will be able to suit your payment options-

  1. Policy term of 21 years and Premium Paying Terms as 9 years.
  2. Policy term of 21 years and Premium Paying Terms as 8 years
  3. Policy term of 16 years and Premium Paying Terms as 9 years.
  4. Policy term of 16 years and Premium Paying Terms as 8 years.
  5. Policy term of 12 years and Premium Paying Terms as 9 years.
  6. Policy term of 12 years and Premium Paying Terms as 8 years.

Unfortunately, the entirety of uniqueness of this LIC Endowment Plan finishes right here. If you think the disadvantage of smaller returns does not beat the option to choose your premium paying terms as well as policy term, this plan might be just what you need.

Table Of Returns-

Here is a table similar to the table released by LIC Endowment Plan policy showcasing their plan’s return details-

Policy Term (years) 12 12 16 16 21 21
Premium Paying Term 9 8 9 8 9 8
Premium Amount Per Year 31021 33961 26778 29308 22398 24520
Policy Year
1 31021 33961 26778 29308 22398 24520
2 31021 33961 26778 29308 22398 24520
3 31021 33961 26778 29308 22398 24520
4 31021 33961 26778 29308 22398 24520
5 31021 33961 26778 29308 22398 24520
6 31021 33961 26778 29308 22398 24520
7 31021 33961 26778 29308 22398 24520
8 31021 33961 26778 29308 22398 24520
9 31021 26778 22398
10
11
12
13 450000 450000
14
15
16
17 518700 518700
18
19
20
21
22 632400 632400
Return Rates- 6% 6% 6.48% 6.47% 6.86% 6.86%

 

In the above table, Simple Revisionary Bonus (SRB) is being assumed as Rs 40 per Rs 1000 sum assured. Final Additional Bonus is being assumed as 2% of the sum assured.

The actual values of these bonuses will be more or less same to the values assumed here. (The above values are assumed based on the bonus rates of 2014-2015).

From the above table, we can concur that the returns policy buyers get from the LIC Endowment Plan is highly dependent on bonus rates. This means that unless LIC plans to change the value of their bonuses drastically, the returns will be very average of up to 6%-7%. Again, for plan 1- the plan of 12 years’ policy term, final additional bonuses will most probably be not applicable.

A very few companies provide endowment policies, Reliance and Kotak being some of them. The general argument against endowment policies, the argument of low returns over a long period of time is very strong. It naturally puts most other policies, such as retirement funds, buying insurance, mutual funds etc. at a favorable position in the eyes of the many.

What the LIC Endowment Plan brings with it is the assurance of safety. The definitions of endowment policies are straight forward and clear making this benefit of theirs slightly advantageous over insurance policies. It also provides a disciplined, cut to the point method of saving money for the future. Ultimately, whether these benefits do the job for you are up to you to decide.

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