Recently, one of our long-time clients asked about Endowment plans and which LIC option would be best. When our advisor inquired about his interest in endowment plans and his preference for LIC, the client’s reasoning was clear yet a bit concerning.
He said, "My grandparents and parents have had LIC policies for 40-50 years, and our agent feels like family. LIC seems trustworthy because so many people trust it.
As far as endowment plans are concerned, a friend told me they are cheap and offer insurance along with some cash value. That seems like a good combination. So, I thought I would reach out to you and find out which endowment policy from LIc would seem like a better fit for me.”
After a detailed consultation call (over a free consultation call!), our advisor explained that term insurance might be a better, more affordable choice if he’s looking for effective life insurance. While LIC's reputation is strong among its long-time clients and agents, it might not be the whole picture. The client ended up choosing a term insurance policy from a top life insurance provider.
However, we realised that we needed to get a customised review of one of LIC's best-known endowment policies, the LIC Single Premium Endowment Plan.
Take a look!
LIC Single Premium Endowment Plan Review
Much like most plans from the stable of LIC, the Single premium Endowment Plan is not a good pick either. The plan is not comprehensive and offers features that can’t be considered perk, including its most basic offering of a single premium mode. This robs the policyholders of the flexibility to choose from a payment mode frequency that caters to their financial bandwidth. Additionally, the presence of an in-built Return of Premium feature and a low minimum cover amount - are severely discouraging.
All these cons outweigh the pros of loan facilities, instalment options for maturity and death benefits and participation in company profits.
Then, there is the issue of LIC’s overall operational efficiency, considering that it’s a public sector insurer.
All of this should convince you to take up a different insurer and preferably a different type of life insurance policy (since endowment policies, in general, become a tad more expensive considering their additional feature of cash value).
Heads Up: It takes an average person up to 5 hours to read & analyse a policy, and 10 hours or more to compare different plans and make a decision.This is why we propose a better alternative - taking a 30-minute FREE consultation with Ditto’s certified advisors.
We have a spam-free guarantee, and we’ll never push you to buy a plan. Don’t delay this - we have limited slots every day, so book a quick call here before they run out.
LIC Single Premium Endowment Plan Brief
Life Insurance Corporation of India (LIC), established in 1956, is the oldest public sector life insurer in India. It provides a broad range of financial products, such as endowment plans, ULIPs, pension plans, micro insurance, and term insurance. LIC's long-standing presence and diverse product offerings have built a large client base. Currently, LIC's performance metrics are:
- Claim Settlement Ratio (CSR) of 98.71% (the industry average is 97.74%)
- Amount Settlement Ratio (ASR) of 95.1 (the industry average is 90.9%)
- Complaint Volume of 10.5 (the industry average is 72.8)
- Annual average business volume of ₹205,137 crores (the industry average is ₹14,204 crores)
Despite these impressive figures, LIC’s popularity may be somewhat misleading. Historically, LIC had a monopoly in the Indian life insurance market, leading many older clients to remain loyal due to limited awareness of newer, more efficient competitors. However, LIC's appeal has diminished with the rise of aggressive marketing and improved offerings from other insurers. Additionally, LIC faces challenges due to its less comprehensive term insurance policies, lack of term insurance riders, and higher plan costs.
Coming to the LIC Single Premium Endowment Plan - the policy is basic at its best. While LIC has introduced a few features to make it seem interesting, the caveats are quite prominent enough to be discouraging for potential policyholders. As the name suggests, this is an endowment plan where only one type of premium payment mode is available - single payment. Unfortunately, this is not really a benefit, considering policyholders lose the flexibility to have access to choices across premium payment frequencies based on their financial bandwidth. The policy also has a mandatory Return of Premium(ROP) feature that is built-in and, again, not really a perk because since ROPs guarantee payouts, there is almost always a significant rise in premiums. The coverage also starts at pretty low (₹50k), possibly to keep the premiums pocket-friendly. Additionally, the plan comes with only a couple of riders, severely limiting the chances of customisation.
The only positive side of the LIC Single Premium Endowment Plan is that its coverage can start pretty early, from 90 days onwards.
Under such circumstances, the plan is really not a very effective or comprehensive policy. You might want to look around for other insurers (and preferably term insurance plans instead of endowment policies; to know why - read our blog) and better plans.
LIC Single Premium Endowment Plan: Table of Features
| FEATURES | DETAILS |
|---|---|
| Coverage | ₹50k minimum - maximum is based on the discretion of the underwriting team & your eligibility |
| Entry age | 90 days to 65 years |
| Premium Payment Mode | Single premium only |
| Minimum policy term | 10 years |
| Maximum policy term | 25 years |
| Available Riders | Accidental Death and Disability Benefit Rider | New Term Assurance Rider |
Should You Buy the LIC Single Premium Endowment Plan?
- LIC as an insurer: LIC, or Life Insurance Corporation of India, was once the go-to name for life insurance products such as term and whole life policies. Today, however, a range of reputable insurers offers more comprehensive, customisable, and affordable options. As a result, LIC’s products are less favoured and often not recommended.
LIC’s offerings are seen as neither thorough nor cost-effective, with limited-term insurance riders available. Consequently, LIC's plans are generally not considered a top choice.
However, what is undeniable is that the insurer has a number of policies to offer across all insurance genres, including endowment policies. Now, in general, at Ditto, we prefer that clients keep their savings and financial protection channels separate. Thus, term insurance plans are one of the best types of life insurance policies in the industry. Moreover, endowment plans come with a cash value, which, unfortunately, boosts the premiums as compared to the standard term insurance policies.
Despite these cons, if you are still looking for an endowment plan, you should still look out for other insurers and not LIC, considering that it’s a public sector insurer that might complicate the overall operational proficiency and create some delays during claim settlement.
2. In-built features of the plan: As an endowment policy, LIC’s Single Premium Endowment Plan has quite a few in-built features to offer -
- Death Benefit: There are two types of death benefit involved under the LIC Single Premium Endowment Plan -
CASE 1: If the policyholder passes away before the date of commencement of risk
The insurer disburses the accrued premium paid to date (apart from the GST, rider premiums, and any additional premiums). No interest rates are involved in this return.
CASE 2: If the policyholder passes away after the date of commencement of risk
The Sum Assured, along with vested Simple Reversionary Bonuses and a Final Additional Bonus, are disbursed to the beneficiaries, wherein the sum assured is equal to the Basic Sum Assured or 1.25 times the Single premium (excluding taxes, extra premium and rider premiums), whichever is higher.
- Maturity Benefit: If the policyholder survives the policy tenure, he/she receives the sum assured on maturity (or base sum assured) along with vested Simple Reversionary Bonuses and Final Additional Bonus, if any.
- Surrender Benefits: You can surrender the policy anytime during the year and receive a higher Guaranteed or Special Surrender Value. The guaranteed Surrender Value comes to 75% of the single premium in the 1st year and 90% of the single premium after the 1st year. The amount so gained excludes taxes, extra premiums, and rider premiums. You’ll also receive the value of any earned bonuses based on the Guaranteed Surrender Value factor.
- Participation in company profits: The policy can receive bonuses linked to the company’s profits. You might earn Simple Reversionary Bonuses based on the company's performance. A Final Bonus may also be awarded if the policy matures or if there is a death claim, according to the company's guidelines. The Central Government will approve any surplus paid to policyholders in line with the LIC Act of 1956.
3. Settlement Option for Maturity Benefit: The Settlement Option allows you to receive your Maturity Benefit in instalments over 5, 10, or 15 years instead of a lump sum. This choice is available to the policyholder if the insured person is a minor or to the insured person once they turn 18. You can opt to receive either the full Maturity Benefit or just a part of it in instalments.
You can choose the instalment amount, either as a fixed sum or a percentage of the total benefit. Instalments can be paid annually, semi-annually, quarterly, or monthly, with minimum amounts set for each payment frequency.
| Maturity Benefit Instalment Frequency | Amount |
|---|---|
| Monthly | ₹5k |
| Quarterly | ₹15k |
| Half-Yearly | ₹25k |
| Yearly | ₹50k |
4. Option to take Death Benefit in instalments: You can receive the death benefit in instalments over 5, 10, or 15 years rather than as a lump sum. The policyholder can make this choice if the insured person is a minor or when the insured person turns 18. You can receive the entire death benefit or just a part of it in instalments.
You can set the instalment amount as a specific amount or a percentage of the total benefit. Instalments can be paid annually, semi-annually, quarterly, or monthly, with minimum amounts required for each payment frequency.
| Death Benefit Instalment Frequency | Amount |
|---|---|
| Monthly | ₹5k |
| Quarterly | ₹15k |
| Half-Yearly | ₹25k |
| Yearly | ₹50k |
5. Loans against policy: You can borrow money under this plan any time after one year of having the policy. The maximum loan amount is 90% of the policy’s surrender value when the loan is approved.
The Corporation will set the interest rate periodically, following IRDAI guidelines. Any unpaid loan amount plus interest will be subtracted from your claim proceeds when you exit the policy.
6. Available Riders: Much like most insurance policies offered under the LIC stable, the LIC Single Premium Endowment Plan offers only a few riders. Needless to say, this severely limits the potential for customisation in the plan. This alone should be discouraging for any potential policyholders. That said, here’s a look at the riders available -
- Accidental Death and Disability Benefit Rider: This rider can only be added when you purchase the policy. If selected, it provides a lump sum payment of the Accident Benefit Rider Sum Assured in the event of accidental death. If you suffer accidental disability within 180 days of the accident, you'll receive the same amount in monthly instalments over 10 years.
- New Term Assurance Rider: This rider can only be added when you purchase the policy. It provides coverage for the policy term and pays the Term Assurance Rider Sum Assured if the insured dies during this period.
The rider’s premium cannot exceed the main policy’s premium, and the total cost of all riders cannot be more than 30% of the main policy’s premium. The rider’s coverage cannot surpass the basic sum insured by the main policy.
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What’s Unique About the LIC Single Premium Endowment Plan?
Apart from the obvious uniqueness of the policy, wherein only single premium payment options are available to pay for the policy, the LIC Single Premium Endowment Plan doesn’t offer many unique features. As policyholders, you can opt for instalments for both the death and maturity benefits and draw out loans against this policy.
