Life Insurance Corporation of India (LIC) offers a range of insurance products to cater to diverse financial needs. One such popular product is the LIC money-back policy. Designed to provide periodic money-back benefits along with life coverage, these policies offer a unique combination of protection and liquidity. In this article, we will delve into the functioning of LIC money-back policies, the timelines for receiving money-back benefits, and the advantages they offer for financial planning.
How Does an LIC Money-Back Policy Function?
LIC money-back policies operate on the principle of providing periodic survival benefits to the policyholder during the policy term. Here’s a breakdown of how they work
Policy Term and Premium Payments
The policyholder selects a specific policy term, such as 20 or 25 years, and pays regular premiums throughout the term.
Money-back benefits are provided at specified intervals during the policy term. These intervals, usually every 5 years, are pre-determined and mentioned in the policy documentation. For instance, in a 20-year policy, one may receive money-back benefits at the end of the 5th, 10th, and 15th years.
Percentage of Sum Assured
The money-back benefits are a percentage of the sum assured chosen at the time of policy inception. For example, if the sum assured is Rs. 10 lakhs and the money-back benefit is 20%, the policyholder will receive Rs. 2 lakhs as a money-back benefit.
Along with the money-back benefits, LIC money-back policies provide life coverage throughout the policy term. In case of the policyholder’s unfortunate demise during the term, the nominee or beneficiaries receive the sum assured, irrespective of the money-back benefits already received.
If the policyholder survives the entire policy term, they will receive the remaining sum assured, known as the maturity benefit, at the end of the policy term. This amount is usually equal to the sum assured minus the money-back benefits already paid.
Advantages of LIC Money-Back Policy
Liquidity and Financial
LIC money-back policies provide periodic liquidity through money-back benefits, which can be utilized for various purposes like funding education, meeting financial goals, or handling financial emergencies.
Along with the money-back benefits, these policies offer life coverage, ensuring financial security for your loved ones in case of any unfortunate event.
No Premium Refunds
Unlike some other insurance plans, LIC money-back policies do not provide premium refunds if the policyholder survives the entire term. However, the money-back benefits received over the policy term compensate for this.
Premiums paid towards LIC money-back policies are eligible for tax benefits under Section 80C of the Income Tax Act. The money-back benefits and maturity benefits are also tax-free under Section 10(10D), subject to certain conditions.
When Can I Expect to Receive the Money-Back Benefits?
The timing of money-back benefits depends on the policy term and the intervals specified in the policy. Typically, money-back benefits are provided every 5 years during the policy term. For example, in a 20-year policy, you can expect to receive money-back benefits at the end of the 5th, 10th, and 15th years. The specific details regarding the intervals and the percentage of sum assured as money-back benefits are mentioned in the policy documentation.
Frequently Asked Questions (FAQs)
What happens if I miss paying the premium for my LIC money-back policy?
LIC provides a grace period for premium payment, usually 30 days. If you fail to pay the premium within this period, the policy may lapse. However, LIC offers provisions for policy revival within a certain period, subject to specific terms and conditions.
Can I surrender my LIC money-back 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 duration of the policy and the number of premiums paid.
Are the money-back benefits guaranteed in LIC money-back policies?
Yes, the money-back benefits are guaranteed and mentioned in the policy documentation. LIC ensures timely payment of these benefits as per the specified intervals during the policy term.
Can I assign my LIC money-back policy to someone else?
Yes, LIC allows policyholders to assign their policies to someone else. The process and conditions for policy assignment are specified by LIC and can be availed as per the guidelines.
Can I avail a loan against my LIC money-back policy?
Yes, LIC provides loan facilities against money-back policies. The loan amount and conditions are subject to the policy’s terms and the surrender value acquired.
LIC money-back policies offer a unique combination of insurance coverage and periodic money-back benefits, providing both protection and liquidity. By understanding how these policies function, the timing of money-back benefits, and the advantages they offer, individuals can make informed decisions about their financial planning and protection needs. Consult with LIC representatives to determine the most suitable money-back policy based on your specific requirements.