Tag: LIC plan

Term Life Insurance: Basics, Benefits, and Considerations

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Life insurance is a contract between an insurer and a policyholder, where the insurer promises to pay a designated beneficiary a sum of money upon the death of the policyholder. 

There are various types of life insurance policies, and term life insurance is one of them. In this article, we will explore the basics of term life insurance, its benefits, drawbacks, and some considerations to keep in mind while choosing a term life insurance policy.

What is Term Life Insurance?

Term life insurance is a type of life insurance policy that provides coverage for a fixed period of time or a “term.” It is designed to provide financial protection to the policyholder’s beneficiaries in the event of the policyholder’s death during the term. Unlike whole life insurance, which provides lifetime coverage and has a cash value component, term life insurance does not have a cash value and is solely focused on providing death benefit coverage.

Term life insurance policies can typically be purchased for terms ranging from one year to 35  years.

Once the term of the policy is over, the coverage ceases, and the policyholder has the option to renew the policy or let it expire.

Benefits of Term Life Insurance:

Affordable Premiums: Term life insurance is generally more affordable than other types of life insurance policies, such as whole life insurance. This is because term life insurance policies only provide coverage for a specified period and do not have a cash value component.

Flexibility: Term life insurance policies can be tailored to meet the policyholder’s needs, such as the length of the term and the amount of coverage.

Simple: Term life insurance policies are relatively simple and straightforward, making them easy to understand.

Death Benefit: Term life insurance policies provide a death benefit that can help provide financial support to the policyholder’s beneficiaries in the event of the policyholder’s death.

Drawbacks of Term Life Insurance:

No Cash Value: Unlike other types of life insurance policies, such as whole life insurance, term life insurance policies do not accumulate cash value over time.

Limited Coverage: Term life insurance policies only provide coverage for a specified period, which means that if the policyholder outlives the term, the policy will expire, and no death benefit will be paid out.

Renewal: If the policyholder decides to renew the policy after the initial term, the premiums may increase, which can make the policy more expensive over time.

Considerations for Choosing a Term Life Insurance Policy:

Length of the Term: When choosing a term life insurance policy, it’s important to consider the length of the term. The length of the term should be long enough to provide adequate coverage for the policyholder’s beneficiaries.

Coverage Amount: The coverage amount should be sufficient to provide financial support to the policyholder’s beneficiaries in the event of the policyholder’s death. It’s important to consider the policyholder’s income, debts, and other financial obligations when determining the coverage amount.

Premiums: The premiums for the policy should be affordable and fit within the policyholder’s budget.

Renewal Options: If the policyholder wants to renew the policy after the initial term, it’s important to consider the renewal options and any associated costs.

Conclusion:

Term life insurance is a popular and affordable option for individuals who want to provide financial protection to their beneficiaries in the event of their death. While term life insurance policies have some drawbacks, such as no cash value and limited coverage, they offer many benefits, such as affordable premiums, flexibility, and a death benefit.

When choosing a term life insurance policy, it’s important to consider the length of the term, coverage amount, premiums, and renewal options to ensure that the policy meets the policyholder’s needs and budget.

Surrender Value Calculation of Jeevan Shanti

Posted on by avinash

1. Jeevan shanti policy can be surrendered at any time after three months from the Date of issuance of policy or after expiry of the free-look period, whichever is later.
2. Surrender is allowed only under the following annuity options:

a) Immediate annuity–
 Option F: Immediate Annuity for life with return of Purchase Price.
 Option J: Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as
long as one of the Annuitant survives and return of Purchase Price on death of last survivor.

b) Deferred annuity–
 Option 1: Deferred annuity for Single life.
 Option 2: Deferred annuity for Joint life.
3. On payment of the surrender value all other benefits payable will cease.
Procedure for Determining Surrender Value:
a. Surrender During deferment period under Deferred Annuity:
SV = F3 x (F1 x Equivalent annuity amount payable for yearly mode + F2 x 110% of Purchase Price)
Where:

 F1 is Annuity Factor applicable at age lbd on the date of Vesting.
 F2 is the Risk Factor applicable for age lbd on the date of Vesting.
 F3 is the Factor applicable for outstanding deferment period in complete full years as at date of
surrender.
For Example: if the policy with deferment Period 20 years is surrendered during 20th year of policy, then outstanding period will be Zero.
 In case of Joint life policies factors F1 and F2 shall depend on the age lbd of younger annuitant.

Example:
Age at Entry (lbd): Primary Annuitant – 45 Years, Secondary Annuitant – 35 years.
Purchase Price – 10,00,000, Deferment Period – 20 years, Annuity Mode – Yearly,
Calculate Surrender Value payable during 4th
year.
 Age lbd of Younger age at Vesting = 35 + 20 = 55 years
 Annuity rate Payable p.a. for 10 lacs Purchase Price under Joint Life = 225.10 + 2.10 = 227.20
Annuity Payable Per annum = 10,00,000 x 227.20/1000 = 2,27,200
 Outstanding Deferment Period = 20 – 4 = 16 years.
 Factor F1 at Age 55 lbd = 9.4760
 Factor F2 at Age 55 lbd = 0.1306
 Factor F3 for Outstanding Deferment Period of 16 years = 23.94%
Surrender Value = F3 x (F1 x Annual Annuity Payable + F2 x 110% of Purchase Price)
= 23.94/100 x (9.4760 x 2,27,200 + 0.1306 x 11,00,000)
= 0.2394 x (21,52,947 + 1,43,660)
= 0.2394 x (22, 96,607) = 5,49,807

Surrender Value and Loan Payable during each year under Above Example:

b) Surrender after deferment period under Deferred Annuity and under Immediate Annuity:

Surrender Value =
(F1 x Equivalent annuity amount payable for yearly mode + F2 x 110% of Purchase Price) – Annuity
installments paid under the policy during the policy year of surrender up to date of surrender.
Where:
 F1 is Annuity Factor applicable for age lbd on the date of surrender.
 F2 is the Risk Factor applicable for age lbd on the date of surrender.
 In case of Joint life policies factors F1 and F2 shall depend on the age lbd of younger annuitant.
Example:
Age at Entry (lbd): Single/Primary Annuitant – 45 Years, Secondary Annuitant – 35 years.
Purchase Price – 10,00,000, Deferment Period – 20 years, Annuity Mode – Yearly,
Calculate Surrender Value after 3 years (During 4th year after Vesting):
a) Under Option F of Immediate Annuity and
b) Option 2 of Deferred Annuity
a) Under Option F of Immediate Annuity:
 Age lbd of Annuitant on the date of Surrender = 45 + 3 = 48
 Annuity Rate under option F for 10 Lacs Purchase Price Payable yearly = 63.30 + 2.10 = 65.40
 Annuity payable p.a = 10,00,000 x 65.40 /1000 = 65400
 Factor F1 for Age lbd 48 years = 10.0515
 Factor F2 for Age lbd 48 years = 0.0828
SV = (F1 x Equivalent annuity amount payable for yearly mode + F2 x 110% of Purchase Price) –
Annuity installments paid under the policy during the policy year of surrender up to date of surrender.
SV = (10.0515 x 65400 + 0.0828 x 11,00,000) – Nil ( As Annuity mode is yearly).
= 6,57,368 + 91,080 = 7,48,448

Surrender of LIC Insurance policy

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 LIC POLICY Surrender

If you don’t want to continue LIC policy for any reason then LIC gives you an option to surrender your Policy. There are Lock in period for 3 years in Endowment Plan and 5 years for ULIP plan. LIC policy is not allowed in LOCK in period. It does not matter of policy term but it is clear that delay in surrender gives you better amount. Normally LIC agents in Mumbai are doing all this procedure for surrender of LIC policies.

Where can you surrender your LIC policy

ü LIC parent Branch: Where you have taken your policy, you may go there and do all procedure.

ü LIC Customer Zone: LIC has opened several Customer Zone to help its customer.Here one can get any service related to LIC policies irespestive of parent branch. It is compulsory that Customer has to visit by own along with ID card.You can find Customer Zone in your locality with the help of internet.

ü LIC agent: Just do a call to LIC agent,he will do all documentation of behalf of you.

Documents Require To surrender LIC Policy

Ø Original Policy Paper (Bond Paper)

Ø  Surrender Form (No.5074)Surrender Value(Form No.5704)

Here and take the printout

Ø Your Bank cancelled cheque (your name should be printed on cheque)

If Your Name is not printed on cheque or you don’t have Cheque Book then

 Submit bank passbook photocopy.

Ø NEFT form :Fill all bank details , so that amount will go directly to you.

Ø Aaadhar Card and PAN card self attested zerox copy

Ø One questionnaire form also should be fill in LIC office.

How to Calculate Surrender Amount?

The exact value will be conveyed to you through servicing branch or you can also collect it through SMS/LIC customer care.but  you can also calculate it by own.

{(Total Premium Paid in years/total premium Payable years)X Sum Assured } + Accrued Bonus } X Surrender Factor

 Suppose Mr A has take a policy of rs 30 Lac for 30 years  terms. Now Having paid for 10 years , Mr A wants to surrender it.

{(10/30) X 30 lac} + Bonus } LIC surrender Factor}

 

Note:Once you submit the all necessary documents, then wait for 5-10 days they transfer the fund to your bank account.

 

If you plan to surrender your endowment policy, bear in mind all the money you have paid that you may never get back.

NEFT FORM FOR LIC

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NEFT (National Electronic Fund Transfer) is a compulsory form when you are taking LOAN , Surrender previous policy , Maturity of Your LIC policies etc. LIC transect of money only through NEFT to customers. Its a National wide system to transfer a Fund as per RBI guidelines.

How to fill NEFT form

Mention all policies numbers in the form .

Put bank details where You want Your money should come

Like

  1. Bank name
  2. Bank branch address
  3. Account types: saving/current
  4. Bank account no
  5. IFS CODE
  6. MOBILE NO
  7. EMAIL ID

Enclosed paper alongwith NACH

Cancelled cheque YOUR should be printed

OR

BANK PASSBOOK XEROX

PAN card zerox

Advantage of submitting NACH

Once you submit NEFT, LIC will never demand again for further transactions. No any extra charge made by LIC. Each payments from LIC through NEFT will create one unique transaction reference.

Where to submit NEFT Details

Servicing LIC branch : address is prescribed to policy BOND paper.

Customer zone: LIC has customer zone at different locations at several place. You may find customer zone near by to you.

Through EMAIL : you can mail with attachments of NEFT and cancelled cheque and PAN.

LIC term insurance is costlier than others

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Insurance Premium of term insurance plan of LIC is very costly than other insurer in India. What would be the reason?If 30yrs old person gets term insurance than Yearly premium would be rs 19000 for 1cr sum assured policy even though private insurer charge approx 10 to 11k only.
Few reasons to ponder prior to take LIC term insurance:

LIC CLAIM RATIO: LIC CLAIM statement is the highest in the world Its 98.3% as per IRDA data. We all know LIC has huge customers but maintaining greatest CLAIM RATIO .

Government’s backing: LIC is paying huge dividends to government from its Yearly profit . On the contrary Government provides sovereign Guarantee on each policies . Which is not available in PRIVATE INSURER.

Mortality Rate: it is basic ingredient to calculate premium of any policies . But we know that mortality Rate is common for all insurer. Private company must not reduce it. Even though longevity of every citizen has been increased and on an average people living 72 years normally.Which is common for all insurance company

Admin Charge: LIC has the lowest administration charge amongst almost all insurers. Salary of LIC staff,Offices and all other expenditure is very less in LIC.It is visible to all.

Note: The only reason for high premium of its Guaranteed CLAIM payments. One can take online term insurance from LIC with reduced premium.

LIC gives BONUS to policy holders

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LIC declare Bonus rate every years but it not paid immediately, it will be paid at the time of maturity or premature death of policy holder. Bonus varies as per the plans term and condition.Bonus rate of LIC is declared on per thousand of sum assure(SA) basis.
Original bond paper consist the detail of type of bonus available in the Insurance PLAN. One can get bonus rate charts of desired year from LIC website home page

 

 Types of LIC bonus

There are four types of bonuses declared by LIC.

  • Simple Reversionary Bonus

  • Final Additional Bonus (FAB) or Terminal Bonus

  • Loyalty Additions

  • Guaranteed Additions (GA

Simple Reversionary Bonus

  • What we simply meant when we say Bonus is this “Simple Reversionary Bonuses”. This bonus is declared per thousand of the Sum Assured Amount in each financial year by LIC but will be paid at the end of maturity period or on the death of the policyholder, whichever is earlier.

  • For instance if you are holding Jeevan Lakshya policy with Sum Assure amount of Rs.10 lakhs and policy term exceeding 20 years and the bonus declared this year is Rs.49, then your bonus amount would be Rs.49,000 for current year, but as said earlier, you will get this amount only at maturity or on death.

Final Additional Bonus (FAB) or Terminal Bonus

  • This is the second type of bonus declared by LIC termed as Final Additional Bonus (FAB). FAB is a onetime payment and paid only to those policyholders who have policy of longer duration, say 15 years and more, and has paid premium for all 15 years. Usually, policies having Guaranteed Additions are not eligible for FAB.

Loyalty Additions

Loyalty Addition is a non-guaranteed bonus which is given as an appreciation of being a long-term loyal customer of LIC. Usually this is also declared per thousand of sum depending and at the end of the policy term but for some policies it gets declared after completion of certain policy period such as in Jeevan Saral Policy, loyalty additions will be awarded to the policyholders after completing minimum of 10 years. But likewise FAB, loyal addition is also paid at the end of maturity period or on death whichever is earlier subject to completion of minimum policy period.

Guaranteed Additions (GA)

  • Some of the LIC Policies offers a “Guaranteed Additions” which means that policyholder will get an assured amount of sum for a specified period. For instance, Jeevan Shiromani policy provides a Guaranteed Additions of Rs.50 per year per thousand sum assured for first five years of the policy.

  • Another such policy is Komal Jeevan (Now closed plan). Guaranteed Additions are added with the Basic Sum Assured and paid at the time of claim.

How to Calculate LIC bonus

  • Suppose SA =10,00,000 and policy is taken for Term 30 yrs

  • Bonus declared = 49/1000

                                        then   1000000X49X30  

                                                       1000

                    =14,70,000

  • FAB declared = 1100/1000

=11,00,000

 

Then Total Maturity =SA + Bonus + FAB

 

= 10 lac+14.70 lac+11 lac=35.70 lac

National Automated Clearing House (NACH) for LIC Policy

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If you are taking a LIC policy in monthly mode then you have to submit NACH form along with LIC proposal. NACH is a replacement of ECS (electric clearance service) form. As you must know ECS was giving authority to your bank for monthly deduction from your account, same thing NACH will do .

But one basic difference is that you have to pay two month’s premium to start the policy ,whereas, through ECS only one month premium was needed to log in your policy in LIC .

One benefit is there ,Now you don’t need to go to concern BANK to get stamp on this NACH ,like it was in practice in ECS form.
 
Difference between ECS and NACH 

NACH

  1. Administered by NPCI
  2. Bank if LIVE on NPCI all its branches participate in NACH
  3. Creation of NACH master on the basis of creating branch
  4. Customer need not visit Bank-Branch for validation of mandate form
  5. Cheque leaf type mandate form
  6. NACH processing starts only when mandate is validated and accepted by destination bank
  7. Only CBS account number allowed ( 9 digit or more )

ECS

  1. Administered by RBI
  2. Participation of Bank branch if authorised by RBI
  3. Creation of ECS master on the basis of MICR
  4. Customer needs to visit Bank-Branch for validation of mandate form
  5. A4 type ECS mandate form
  6. ECS processing starts immediately on registration
  7. No restriction on account number
  8. Under ECS-Mly, one premium at NB stage

How to link LIC Policy with Aadhaar Card & PAN Card ?

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Its compulsory to link your Aadhaar and PAN card wilth New LIC policy and OLD LIC policy otherwise you will not get maturity amount. You can link aadahr and PAN card online and offline both manner.As per Govt Directives it is mandatory to link Aadhar with all financial instruments.

There are two methods to link Aadhaar and PAN with LIC plan

 

1) Offline: We have shown forms and also elaborate how to fill this form.

2) Online:Go to official LIC web site and update  

 

Offline Method

There is form available in every LIC office collect it fill will all existing  LIC POLICy details and submit there. 

 
 

Online Method

Follow some Step 

 

  • Go to official website of LIC of India 
  • Click to link Addahr Card 
  • New window will be open
  • Fill all the detail as Aadhar card
  • Get OTP on resitered Mobile 
  • Submit All