May 23, 2024

Understanding LIC Endowment Policy Insurance Coverage and Savings Explained

4 min read
How does an LIC endowment policy

Life Insurance Corporation of India (LIC) offers a variety of insurance products tailored to meet individuals’ financial needs. Among them, LIC endowment policies stand out as they provide both insurance coverage and a savings element. In this article, we will delve into the working of LIC endowment policies, their features, and the advantages they offer.

How Does an LIC Endowment Policy Work?

LIC endowment policies work by combining elements of insurance coverage and savings. Here’s a breakdown of how they function

  • Premium Payments

As a policyholder, you are required to pay regular premiums for the specified term of the policy. These premiums consist of two components: one for the insurance coverage and the other for the savings component.

  • Insurance Coverage
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 A portion of the premium goes towards providing life insurance coverage. In case of the policyholder’s unfortunate demise during the policy term, the sum assured (the coverage amount chosen at the policy’s inception) is paid out to the nominee or beneficiaries.

  • Savings Element

The remaining portion of the premium is allocated towards building a savings corpus. Over time, this corpus accumulates with interest, similar to a savings account. At the end of the policy term, the policyholder receives the maturity benefit, which includes the sum assured and the accumulated savings.

  • Maturity Benefit

The maturity benefit is the amount payable to the policyholder upon completion of the policy term, provided the policyholder survives the term. It comprises the sum assured plus the accumulated savings, which can be used for various purposes such as meeting financial goals, funding education, or retirement planning.

Advantages of LIC Endowment Policy

  • Dual Benefits

LIC endowment policies provide the dual advantage of insurance coverage and savings. They offer financial protection to your loved ones in case of an unfortunate event, while also helping you accumulate savings for future needs.

  • Guaranteed Maturity Benefit

 Unlike pure term insurance policies, LIC endowment policies come with a guaranteed maturity benefit. This ensures that you receive a lump sum amount at the end of the policy term, regardless of whether any unfortunate event occurs.

  • Participating and Non-Participating Policies
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 LIC offers both participating and non-participating endowment policies. Participating policies are eligible to receive bonuses declared by LIC, which further enhance the maturity benefits. Non-participating policies do not participate in any bonus distribution.

  • Tax Benefits

 Premiums paid towards LIC endowment policies are eligible for tax benefits under Section 80C of the Income Tax Act. Additionally, the maturity benefit received is tax-free under Section 10(10D) of the Act, subject to certain conditions.

Frequently Asked Questions (FAQs)

Can I take a loan against my LIC endowment policy?

Yes, LIC allows policyholders to avail loans against their endowment policies once they acquire a surrender value. The loan amount is typically a percentage of the policy’s surrender value.

Can I surrender my LIC endowment policy before the completion of the policy term?

Yes, you have the option to surrender your policy before the completion of the term. However, the surrender value depends on the policy’s duration and the number of premiums paid.

What happens if I stop paying premiums for my LIC endowment policy?

If you discontinue premium payments before the policy acquires a surrender value, the policy will lapse, and the coverage and savings components will cease. However, LIC offers provisions for policy revival within a certain period.

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Can I modify the sum assured of my LIC endowment policy after purchasing it?

No, the sum assured of an LIC endowment policy cannot be modified after the policy is issued. It is determined at the inception of the policy and remains constant throughout the policy term.

Can I convert my LIC endowment policy into a different type of policy?

LIC provides options to convert certain endowment policies into other types of policies like whole life or paid-up policies, subject to specific terms and conditions.


LIC endowment policies offer the combined benefits of insurance coverage and savings. By understanding their working, advantages, and features such as premiums, maturity benefits, and the savings component, individuals can make informed decisions about securing their financial future. Consult with LIC representatives to determine the most suitable endowment policy based on your specific needs and goals.

Read Also : Understanding LIC Term Insurance Policy How it Works and Benefits

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