The full form of LIC is LIFE INSURANCE CORPORATION OF INDIA
LIC is an insurance company owned by the government. The LIC is a life insurance and investment company under the Life Insurance act of India in 1956. The Life insurance act of India allows the insurance industry to come under government control, and have nationalization of the companies.
How does LIC policy work?
You might have a LIC policy, Know full form of LIC, but don’t know exactly how LIC policy it works? There are several policies by LIC including LIC Jeevan Tarang policy, LIC Jeevan Anand policy, etc. There are several points in LIC policy that one should know before getting a policy.
A lot of people consider that if they take a policy then there will be no problem ahead. But there are some things you should check before taking the policy, what the policy is about? How it will be beneficial to you and how it works, etc.
Before understanding how the LIC policy works, know these important terms.
Money-back plans and Non-Money back plans
Money-back plans are those which pay you after a specific time like 4th year, 8th year, 12th year, and finally again after the maturity period. People consider this plan as good because they constantly get money back, provided that you are ready to pay high premiums.
Non-Money back plans for LIC are the plans which pay you directly after the maturity period. You don’t get return money in between the period.
There are several types of bonuses provided by the LIC. Get to know about it before knowing how the how LIC policies work? Most people get confused with bonuses by LIC.
Simple reversionary bonus
LIC provides a simple reversionary bonus on the policies. This bonus means the additional amount over the per thousand amount. This means if you take a policy of 1000000 and the simple reversionary bonus is 60 rupees per thousand, then one will get 60000 rupees at the end of the maturity period.
Final Additional bonus
The final Additional bonus on LIC policies is a special amount given by LIC for the appreciation of taking long-term policies. This is generally for only policies of more than 15 years.
This is another bonus amount which LIC gives after completion of certain milestone and being loyal with LIC. This is non guaranteed bonus amount. In some policies like Jeevan Saral, the loyalty addition is given after 10 years of the policy.
Guaranteed additions are the amount per thousand of the actual amount. The guaranteed addition is a fixed amount for some of the policies of LIC for the first five years.
Surrender value is important when one wants to understand how LIC policies work? Its value is nothing but your future maturity value reduced to today’s value when you will discontinue your LIC policy. In some policies, if you discontinue your policy within 3 years of paying then you will not get anything in return.
If you take a policy, pay some premiums but now you want to pay the whole amount once instead of monthly premiums. This is called a paid-up policy. In the paid-up policy, you will get the same amount after the maturity period that you were getting in the monthly premium.
How LIC policies works
LIC policies work in different ways for different policies. The above-given terms are important enough to know how the LIC policies work? Now you know what is surrender value, what are the different bonuses etc. It’s easy to understand how a policy will give you money.
The company gives plans to customers, and the interested ones buy them. They pay premiums. The LIC assures them that they will get extra benefits in the policy for years.
LIC collects money and invests it in the good performing bonds, debts, mutual funds. The gained profit is distributed and the assured money is given time to time to the customers after the maturity period. That’s a simple explanation of how the LIC policies work.
Types of LIC policies
As most people have LIC insurance, the LIC has made various plans for the customers. The LIC has introduced the plans for several age groups, several years, several offers, and several benefits. All of the plans come under a few categories. Let us know one by one the types of LIC policies.
If we summerise all the policies in categories then these are few types of LIC policies and plans
Whole Life Insurance
Whole life insurance is the policy that is for life and one of the type of LIC policies. Means policy assured has to pay the premium for his whole life, and the money will be claimed by the nominee after the death of the person. The amount is with the benefits and bonuses, given to the nominee. This is applicable up to 100 years of life. Usually, those who are worried about family, invest in this policy.
This plan is for the future of the children. The funds are for future goals such as the marriage of a child, education, etc. The premium should be paid yearly for 18 years or a one-time payment. In some cases if something unfortunate happens then the child can get the claimed money and also the policies waive off the future premiums and the policy continues till maturity.
Retirement plans are for your age. The premium can be paid yearly or a one-time payment. The money benefits will help the assured life without any worries at the time of retirement. If any unfortunate event happens then the money will be given to the nominee.
It is the simplest plan from LIC, comes with the life insurance cover. The lowest premiums every year have to be paid, and if the person is damaged or passes away within the maturity period then the cover gives assured benefits. And fortunately, if nothing happens then the money will be given at the time of maturity benefits with some additional benefits.
Unit linked insurance plan (ULIP)
ULIP, a type of LIC policy, allows both insurance and investment. The half fund is utilize as the insurance cover and half of it is used as an investment in the funds provided by the insurance company. The maturity benefits are dependent on the investment in funds.
Here some amount is kept for the life insurance cover, and another amount is invested in debt. We can call it the combination of investment and debt.
Money-back plans give you periodic returns with the insurance cover. The amount is given time to time back and finally at the maturity time. Money back plans are also the types of the LIC policies.
LIC plans are affordable as we see in the above article also we came to know about full form of LIC and its term plans. As we read above now we have ideas from types of LIC policies that which policy is better for our family or children.
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