Significance of LIC Term Plan

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Significance of LIC Term Plan

13/07/2018 | businesses | No Comments

Should you reach out to a financial advisor or any friend who is good at offering financial advice, they will suggest a term plan. A common statement that you will come across is that a term plan is a much-needed addition to your financial portfolio. Irrespective of how much advice one receives, it is your money at the end of the day. Thus, you need to take a call, whether you should or should not buy an LIC Term Plan.

An LIC Term Plan is an agreement between you, the policy holder and the insurer, LIC. According to the agreement, the policy holder must pay premiums at regular intervals and in return, LIC will offer life cover. Should anything unexpected happen to the policy holder, the policy will compensate by paying the sum assured to the nominees of the policy. A term plan is as simple as an insurance plan can get.

Unlike most of the other insurance plans, a term plan doesn’t have a savings or investment components. This not only helps it focus on only one thing but also keeps the premium prices under control. If you do decide to buy an LIC Term Plan, the following are some of the benefits that are yours for the taking.

  • You get access to a very high sum assured values by paying lower premiums.
  • LIC offers even lower premiums for non-smokers.
  • The policy is available for a wider age range. People as young as 18 years and as old as 75 years can own the policy.
  • The plans come with a great deal of flexibility when it comes to choosing the sum assured, the term of the plan, the frequency of payments, termination and so on.
  • With your LIC term plan, you can choose from a detailed list of riders.
  • You have the ability to convert the term plan into regular plans at a later stage.
  • Depending on your preference, you can either buy the policy online or offline (through agents or intermediaries like Coverfox).
  • And most importantly, you are joining hands with a brand that has a claim settlement ratio of 98{dca867521a4a0b3a4349402eb95955da17ddb47b6005a67bb6f20634439cf3a9}.
  • The policy premium amount is tax deductible under Section 80C.
  • The payouts are all tax exempted under Section 10(10D) of the Income Tax Act,1961.

The claim settlement ratio or CSR is one of the parameters to assess the effectiveness of a brand. It simply shows the total number of claims that an insurer has settled versus the total number of claims. A higher number indicates, that the probability of your claim being settled is pretty high.

What Risks are covered through LIC Term Plan

As we already know, an LIC term plan or any term plan for that matter has very limited focus points. A term plan comes into effect only if a policy holder loses his or her life. The sum assured according to the policy document is paid out to the nominees of the policy.

LIC term plan covers most of the reasons that lead to the death of a policyholder. Whether the person meets with an accident or it is a natural death, the policy covers them all. However, the only risk that the policy doesn’t cover is suicide cases.

LIC will not acknowledge any claims request if the policy holder commits suicide within the first year of buying a term plan. Should the policy holder outlive the LIC term plan, they are not entitled to any financial benefits.

How Do You Calculate Premium on Term Plan

The premium that you pay for your LIC term plan is not a constant value, in fact, it fluctuates based on several parameters. The following are some of them.

  • Age

At a younger age, the risk associated with a person is relatively lower. This is the reason why insurers offer term plans at affordable prices to younger individuals.

  • Lifestyle

The lifestyle you chose also plays an important role in deciding the policy premiums. People who smoke and consume alcohol are more likely to pay slightly higher premiums than the ones who do not.

  • Term

The premiums that you pay is directly proportional to the term of the policy. If you opt for a short term policy, say for 10 years, you will end up paying lower premiums than a 25 or 30 year term plan.

  • Sum assured

A higher sum assured will fetch a slightly higher premium as well. But one must not compromise on the policy cover due to this.

The number of benefits that an LIC term plan brings on the table, makes it a value for money proposition. Couple it with its simplicity and flexibility, a term plan is really hard to beat.

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