LIC

MONEY BACK POLICY

WHAT IS INSURANCE?
The business of insurance is related to the protection of the economic values of assets.
Every asset has a value. The asset is valuable to the owner, because he expects to get some
benefit from it. The benefit may be an income or something else. It is a benefit because it meets
some of his needs. In the case of a factory or a cow, the product generated by is sold & income is
generated. In the case of a motorcar, it provides comfort & convenience in transportation. There
is no direct income.
Every asset is expected to last for a certain period of time during which it will perform.
After that, the benefit may not be available. There is a lifetime for a machine in a factory or cow
or motorcar. None of them will last forever. The owner is aware of this and he can so manage his
affairs that by the end of that period or lifetime a substitute are made available. Thus, he makes
sure that the value or income is not lost. However, the assets may get lost earlier. An accident or
some other unfortunate event may destroy it or make it non-functional. In that case the owner
and those deriving benefits there from, would be deprived of the benefit & the planned substitute
would not have been ready. There is an adverse or unpleasant situation. Insurance is a
mechanism that helps to reduce the effect of such adverse situation.

PURPOSE AND NEED OF INSURANCE:

Assets are insured, because they are likely to be destroyed, through accidental
occurrences. Such possible occurrences are called perils. Fire, floods, earthquakes, lightning, etc
are perils. If such perils can cause damage to the assets, we say that the asset is exposed to the
risk. Perils are the events. Risks are the consequential losses or damages. The risk to an owner of
a building, because of the perils of an earthquake, may be a few lakhs or a few crores of rupees,
depending on the cost of building & the contents of it.
Insurance does not protect the asset. It does not prevent its loss due to peril. The peril
cannot be avoided through insurance. The peril can sometime be avoided, through better safety
and damage control management. Insurance only tries to reduce the impact of the risk on the
owner of the asset and those who depend on that asset. It only compensates the losses- and that
too, not fully.
Only economic consequences can be insured. If the loss is not financial, insurance may
not be possible. Examples of non-economic losses are love & affection of parents, leadership of
managers, sentimental attachments to family, innovative & creative abilities etc.

HOW INSURANCE WORKS:

The mechanism of insurance is very simple. People who are exposed to same risk come
together & agree that, if anyone of them suffers a loss, the others will share the loss & make
good to the person who lost. All people who send goods by ship are exposed to the same risks,
which are related to water damage, ship sinking, and piracy etc. those owning factories are not
exposed to these risks, but different kind of risk like fire, hailstorms, earthquakes, lightning,
burglary etc. In other words the risk is spread among the community & the likely big impact on
one is reduced to smaller manageable impacts on all.
If a jumbo jet with more than 350 passengers crashes, the loss would run into several
crores of rupees. No airline would be able to bear such a loss. It is unlikely them much jumbo jet
will crash at same time. If 100 airline companies flying jumbo jets, come together into an
insurance pool, whenever one of the jumbo jet crashes, the loss is to be borne by each airline.
Loss would come down to few lakhs of rupees. Thus insurance is a business of sharing.
There are certain principles, which make it possible for insurance to remain a fair
arrangement. The first is that it is difficult for any one in individual to bear the consequences of
the risks that he is exposed to. It will become bearable when the community shares the burden.
The second is that the peril should occur in an accidental manner. The

occurrence has

to be random & not a deliberate creation of the insured person. Insurance companies collect in
advance and create a fund from which the losses are paid.

The collection to be made by each person in advance is to be determined on assumption.

While it may not be possible to tell beforehand, which person will suffer, it may be possible to
tell, on the basis of past experiences, how many person, on an average, may suffer losses. The
following two examples explain the above concept of insurance.

EXAMPLE 1:
In a village, there are 400 houses, each valued at Rs 20000. Every year, on the average, 4 houses
get burnt, resulting into a total loss of Rs 80000. If all the 400 owners come together &
contribute Rs 200 each, the common fund would be Rs 80000. This is enough to pay Rs 20000 to
each of the 4 owners whose houses got burnt. Thus, the risk of 4 owners is spread over 400 house
owners of the village.
EXAMPLE 2:
There are 1000 persons who are all aged 50 and are healthy. It is expected that of these, 10
persons may during the year. If the economic value of the loss suffered by the family of each
dying person is taken to be Rs 20000, the total loss would work out to Rs 200000. This would be
enough to pay Rs 20000 to the family of each of the ten persons who die. Thus, 1000 persons
share the risks in the case of 10 persons.

INSURANCE AS A SOCIAL SECURITY TOOL:

The United Nations Declaration of Human Rights 1948 provides that Everyone has a
right to a standard of living adequate for the health & well-being of himself & his family,
including food, clothing, housing & medical care & necessary social services & the right to
security in the event of unemployment, sickness, disability, widowhood or other lack of
livelihood in circumstances beyond his control.
When the breadwinner dies, to that extent, the familys income dies. The economic
condition of the family is affected, unless other arrangements come into being to restore the
situation. Life insurance provides such an alternate arrangement. If this did not happen, another
family would be pushed into the lower strata of society. The lower strata create a cost on society.
Poor people cost the nation by way of subsides & doles & so on. Poor people also cost by way of
larger growth in population, poor education & vagaries in behavior of children. Life insurance
tends to reduce such costs. In this sense, the life insurance business is complimentary to the
states efforts in social management.

Under a socialistic system the responsibility of full security would be placed upon the
state to find resources for providing social security. In the capitalistic society, a provision of
security is largely left to the individuals. The society provides instruments, which can be used in
securing this aim. Insurance is one of them. In a capitalistic society too, there is a tendency to
provide some social security by the state under some schemes, where members are required to
contribute e.g. social security scheme in UK.
In India, social security finds a place in our constitution. Articles 41 requires the state,
within the limits of its economic capacity & development, to make effective provision for
securing the right to work, to education & to provide public assistance in case of unemployment,
old age, sickness & disablement & in other cases of undeserved want. Part of the states
obligation to the poorer sections is met through the mechanism of life insurance.
As per the law & the direction of the regulatory authorities, insurance companies in India
are obliged to extend insurance benefits to economically weaker sections of the society in the
unorganized sector. Details of these schemes are given in subsequent chapters.

INSURANCE OF INTANGIBLES:
The concept of insurance has been extended beyond the coverage of tangibles assets.
Exporters run the risk of losses if the importers in the other country default in payments or in
collecting the goods. They will also suffer heavily due to sudden changes in currency exchange
rates, economic policies or political disturbances in the other country. These risks are insured.
Doctors run the risk of being charged with negligence & subsequent liability for damages. The
amount in question can be fairly large, beyond the capacity of individual to bear. Thus, insurance
is extended to intangibles. In some countries, the voice of a singer or the legs of a dancer may be
also insured.

ROLE OF INSURANCE IN ECONOMIC DEVELOPMENT:

For economic development, investments are necessary. Investments are made out of
savings. A life insurance company is a major instrument for the mobilization of savings of
people, particularly from the middle & lower income groups. These savings are channeled into
investments for economic growth.
As on 31.3.2002, the total investment of LIC exceeded Rs 245000 crores of which more
than Rs 130000 crores were directly in government (both state & center) related securities, more
than Rs 12000 crores in the state electricity board, nearly nearly Rs 20000 crores in housing
loans & Rs 4000 crores in water supply & sewerage systems. Other investment included road
transport, setting up of industrial estates & directly financing industry. Investment in the
corporate sector (shares, debentures & term loans) exceeded Rs 30000 corers. These directly
affect the lives of the people & their economic well-being.
The LIC is not an exception. All good life insurance companies have huge funds,
accumulated through the payments of small amounts of premium of individuals. These funds are
invested in ways that contribute substantially for the economic development of the countries in
which they do business. The private insurers in India are new & had not built up funds in 2002.
But, in the course of time, they also would be directly & indirectly contributing to the
countrys economic development.

A life insurance company will have large funds. These amounts are collected by way of
premiums. Every premium represents a risk, which is covered by that premium. In effect,
therefore these vast amounts represent pooling of risks. The fund are collected & held in trust for
the benefit of policyholders. The management of life insurance companies are required to keep
this aspect in mind & make all its decision in ways that benefit the community. This applies also
to its investments. That is why successful insurance companies would not be found investing in
speculative ventures. Their investments, as in the case of the LIC, benefit the society at large.

Apart from investment, business & trade benefit through insurance. Without insurance,
trade & commerce will find it difficult to face the impact of major perils like fire, earthquake,
floods, etc. Financiers, like banks would collapse if the factory, financed by it, is reduced to
ashes by a terrible fire. Insurers cover also the loss to financiers if their debtors default.
History of Life Insurance
Although, it makes evolutionary sense to fear and run from death - the recognizing and
accepting of mortality is one of the most important steps humanity ever took in creating modern
civilization. Risk protection has been a primary goal of humans and institutions throughout
history. Protecting against risk is what insurance is all about.
The first historical record of what we know as life insurance came from ancient Romans
in the form of Burial Clubs. Romans believed that in order to avoid being a tortured ghost, one
had to be buried properly. This meant extravagant measures to create elaborate ceremonies that
honored the life of the dead. To meet these high standards, common citizens would join a burial
club and regularly financially contribute to the club. When a member would die, the club would
finance his burial and in some clubs, even give the family of the deceased a stipend.
Modern life insurance, where the insurer insures for monetary purposes was born in 17th
century England. Underwriters would meet at public coffee houses and discuss creating policies
for traders like merchants and ship owners.
In the United States, the first form of life insurance available came from Presbyterian
Synods in Philadelphia and New York. They established the Corporation for Relief of Poor and
Distressed Widows and Children of Presbyterian Ministers in 1759. Episcopalian priests
followed suit and began a fund of their own in 1769. In the period from 1787 to 1837, over
twenty new life insurance companies were started.
In 1835, the infamous New York fire drew people's attention to the need to provide for
sudden and large losses. Two years later, Massachusetts became the first state to require
companies by law to maintain such reserves. The great Chicago fire of 1871 further emphasized
how fires can cause huge losses in densely populated modern cities. The practice of reinsurance,

wherein the risks are spread among several companies, was devised specifically for such
situations.
With the creation of the automobile, public liability insurance, this first made its
appearance in the 1880s, gained importance and acceptance.
More advancements were made to insurance during the process of industrialization. In
1897, the British government passed the Workmen's Compensation Act, which made it
mandatory for a company to insure its employees against industrial accidents.
During the 19th century, many societies were founded to insure the life and health of their
members, while fraternal orders provided low-cost, members-only insurance. Even today, such
fraternal orders continue to provide insurance coverage to members as do most labor
organizations. Many employers sponsor group insurance policies for their employees, providing
not just life insurance, but sickness and accident benefits and old-age pensions. Employees
contribute a certain percentage of the premium for these policies.
EVOLUTION OF LIFE INSURANCE
The first insurers of life were the marine insurance underwriters who started issuing life
insurance policies on the life of master & crew of the ship, & the merchants. The early insurance
contracts took the nature of policies for a short period only. The underwriters issued annuities &
pension for a fixed period or for life to provide relief to widows on death of their husband. The
first life insurance policy was issued on 18th June 1583, on the life of William gibbons for a
period of 12 months.
It was in the eighteenth century societies began to be formed for issuing life insurance
policies. Among such societies the amicable society (1705), the equitable life assurance society
(1762), the west minister society (1792) was the important societies. The premium rates were
varied in view of reputation & the health condition of the insured. During the early years of
nineteenth century, a large number of life insurance companies were formed in India. Some of
these companies preferred to amalgamate their business with other companies & a good number
failed to function effectively. In order to stabilize & strengthen the insurance business, life
Insurance companies Act, 1923 was passed & later amended it in 1946, 1958 & 1967.

LIFE INSURANCE IN INDIA

Life insurance in its current form came in India from United Kingdom (UK) with the
establishment of a British firm, Oriental Life Insurance Company in 1818 followed by Bombay
Life Assurance Company in 1823, the Madras Equitable Life Insurance Society in 1829 &
Oriental Life Assurance Company 1874, prior to 1871, Indian lives were treated as sub-standard
& charged an extra premium of 15% to 20%. Bombay Mutual Life Assurance Society, an Indian
insurer that came into existence in 1871, was the first to cover Indian lives at normal rates. The
Indian Life Assurance Companies Act, 1923 was the first statutory measure to regulate life
insurance business. Later, in 1928 the Indian Insurance Companies Act was enacted, inter alias,
to enable the government to collect statistical information about life & non life insurance
business transacted in India by Indian & foreign insurers, including the provident insurance
societies.
In order to protect the interest of insuring public, earlier legislation was consolidated &
amended by Insurance Act, 1938 with comprehensive provisions for detailed & effective control
over the activities of insurers. In turn to administer the aforesaid legislation an insurance wing
was established & attached first with the ministry of commerce & then ministry of finance. This
ministry was administratively responsible for policy matters pertaining to insurance. The
actuarial & operational matters relating to the insurance industry were looked after by an
attached office in Shimla, headed first by actuary to the government of India, then by
superintendent of insurance & finally by the controller of insurance.
The act was amended in 1950, making far reaching changes such as requirement of
equity capital for companies carrying on life insurance business, ceilings on shareholdings,
stricter control on investment of life insurance companies, submission of periodical returns
relating to investments & such other information to the controller as he may calls for
appointments of administrators for mismanaged companies, ceilings on expenses of management
& agency commission, incorporation of the insurance association of India & formation of
councils & committees thereof.

By 1956, 154 Indian insurers, 16 non-Indian insurers & 75 provident societies were
carrying on life insurance business in India. Life insurance business was conformed mainly to
cities & better off segments of the society.
With a view to spread insurance to rural areas to operate it systematically & to achieve
the objectives of socialistic pattern of society, the government of India decided to nationalize the
life insurance the insurance business. Resultantly after considerable controversy with people both
for & against nationalization, the president of India declared an ordinance on 19.1.1956 taking
over management & control business of life Assurance in India including foreign business of
Indian insurers & Indian business of foreign insurers & then nationalized on 1.9.1956 when the
life insurance corporation came into existence.
More specifically the main aims of nationalization were:
To spread insurance to rural areas,
To encourage public savings to finance the 5 years plan
To provide complete security to policy holders
To prevent malpractices, misuse of powers & positions etc.
To avoid wasteful efforts in competition & conduct the business with

utmost economy

To regulate insurance on scientific basis &

To achieve the goals of the socialistic pattern of society.

LIFE INSURANCE BUSINESS IN INDIA

Fifty years ago, if an person (educated urbanite) was asked to express his opinion about
Life Insurance, he would have unhesitatingly said Money paid when you die. Some would also
have added Widows money. The situation has since changed. The efforts of Life Insurance
Corporation of India, a nationalized institution since 1956, did not go waste. These efforts
brought a perceptible change in the common mans attitude towards the life insurance even in
rural areas of the country. The vision of the Dr. CD Deshmukh, the then Finance minister of the

country, who piloted the nationalization of Life Insurance Business in India, was indicative of
this foresight.
He said in his address to the parliament In t the lives of millions in the rural areas, it will
introduce a new sense of awareness of building for the future in the spirit of calm confidence
which insurance alone can give. It is a measure conceived in a genuine spirit of service to the
people.
WHY LIFE INSURANCE:
IT COVERS THE RISK OF DEATH
The risk of death is covered under insurance scheme but not under ordinary savings
plans. In case of death, insurance pays full sum assured, which would be several times larger
than the total of the premiums paid. Under ordinary savings plans, only accumulated amount is
payable.
IT ENCOURAGES COMPULSORY SAVING
After taking insurance, if the premium is mot paid, the policy lapses. Therefore, the
insured is forced to go on paying premium. In other words it is compulsory. A savings deposit
can be withdrawn very easily.
EASY SETTLEMENT & PROTECTION AGAINST CREDITORS
Once nomination or assignment made, a claim under life insurance can be settled in a
simple way. Under M.W.P Act, the policy moneys become a kind of trust, which cannot be taken
away, even by creditors.
IT HELPS TO ACHIEVE THE PURPOSE OF LIFE ASSURED
If a lump sum amount is received in the hands of anybody, it is quite likely that the
amount might be spent unwisely or in a speculative way. To overcome the risk, the life assured
can provide that the claim amount be given in installments.

PEACE OF MIND
The knowledge that insurance exists to meet the financial consequences of certain risks
provides a form of peace of mind. This is important to private individuals when they insure their
car, house, possessions & so on, but it is also of vital importance in industry & commerce.
LOSS CONTROL
Insurance is primarily concerned with the financial consequences of losses, but it would
be fair to say that insurers have more than a passing interest in loss control. It could be argued
that insurers have no real interest in the complete control of loss, because this would inevitably
lead to end to their business.
SOCIAL BENEFITS
The fact that the owner of the business has the funds available to receiver from a loss
provides the stimulus to business activity we noted earlier. It also means that jobs may not be lost
& goods or services can still be sold. The social benefit of this is that people keep their jobs, their
sources of income are maintained & they can continue to contribute to the national economy.
INVESTMENT OF FUNDS
Insurance companies have at their disposal large amount of money. This arises from the
fact that there is a gap between the receipt of a premium & the payment of the claim. A premium
could be paid in Jan & a claim may not occur until Dec, if it occurs at all. The insurers have this
money & can invest it.
INVISIBLE EARNINGS
We have already said that insurance allows people & organizations to spread risk among
them. In the same way we can also say that countries spread risk. A great deal of insurance is
transacted in the UK in respect of property & liabilities incurred overseas. London is still very
much the center of world insurance & large volumes of premium flow into London every year,
these are invisible earnings.

INSURANCE FACILITATES LIQUIDITY

If a policy holder is not in a position to pay the premium, he can surrender the policy for
a cash sum.
LOAN FACILITY AND TAX RELIEF
He can also take a loan for a temporary period to tide over the difficulty. Sometimes a life
insurance policy is acceptable as security for a commercial loan. By paying the insurance
premium the assured obtains significant relief in income tax & wealth tax.

DIFFERENT ECONOMIC USES OF LIFE INSURANCE

It provides financial security to the family. An ultimately and premature death of the
bread earner results in great financial problem to the family. If no security provision is
made by the breadwinner to meet such situation, his death would make the family
destitute. They will become a burden to the society. Life insurance is the best instrument
to provide security in the event of happening of such contingency.
Life instrument is a potent instrument for saving.
Every person lives in dream- dreams of very high education for children, very decent
marriages to daughters, etc. Life insurance makes such dreams come through even if the
dreamer is no more.
Life insurance provides independence in old age. The lump sum maturity value of a
policy when received can be invested to yield interest sufficient to meet expenses after
retirement from work-life. Or the same money can be utilized to purchase an annuity.
While still young, an individual can purchase a Deferred Annuity and find the same in
easy installments.
Organizations or individuals, who are in Credit Business, can ensure for themselves
recovery of loan when a debtor dies. They can obtain a Group/Individual Life insurance
policy on the lives of debtors, so that if a debtor dies. The policy proceeds repay the
outstanding loan.

 The partnership firm can insure the lives of partners to the extent of capital invested by
each in the business. In case of the death of the partner, the danger of withdrawal of
capital by the legal heirs of the deceased partner can be met from the proceeds of the
policy. Otherwise, there is the risk of financial problems for the partnership business.
Under Key Man Insurance, an organization can insure the lives of the executives, whose
expertise greatly contributes to their profits. In case of death of a key man, the money
provided by the insurance can be utilized to recruit a new person who is equally capable
as a replacement.
Organizations can purchase Group Life insurance policies as part of their Employee
Welfare Program. This acts as a morale booster to the workers and results in improved
productivity.

COMPANY PROFILE
LIFE INSURANCE CORPORATION

Life

Insurance

Corporation

(India) (LIC)

is

an

Indian state-owned insurance

group and investment company headquartered inMumbai. It is the largest insurance company in
India with an estimated asset value of 1560482 crore (US$230 billion).[2] As of 2013 it had total
life fund of Rs.1433103.14 crore with total value of policies sold of 367.82 lakh that year.
The Life Insurance Corporation of India was founded in 1956 when the Parliament of
India passed the Life Insurance of India Act that nationalised the private insurance industry in
India. Over 245 insurance companies and provident societies were merged to create the state
owned Life Insurance Corporation.
LIC holds shares worth about Rs 2.33 lakh crore in all the Nifty companies put together, but it
lowered its holding in a total of 27 Nifty companies during the quarter.
The cumulative value of LIC holding in these 27 companies fell by little over Rs 8,000 crore
during the quarter shows the analysis of changes in their shareholding patterns.
Individually, LIC is estimated to have sold shares worth Rs 500-1,000 crore in each of Mahindra
& Mahindra, HDFC Bank, ICICI Bank, Tata Motors, L&T, HDFC, Wipro, SBI, Maruti Suzuki,
Dr Reddys and Bajaj Auto.
The insurance behemoth also trimmed holdings in Ambuja Cements, Cipla, TCS, Lupin and
Asian Paints. A marginal decline was also witnessed in its stakes in companies such as IDFC,
Hindustan Unilever, Grasim, ACC, BPCL, Bank of Baroda, Punjab National Bank, Sun Pharma
and Tata Power.

On the other hand, LIC further ramped up its stake in a total of 14 Nifty constituents with
purchase of shares worth an estimated Rs 4,000 crore.
The major companies where LIC has raised its stake include Infosys, RIL,Coal India Ltd and
Cairn India. Other such companies are ITC, Power Grid Corp, NTPC, Siemens, Bharti Airtel and
Hero MotoCorp.
The state-run insurer also marginally hiked its exposure in Ultratech, Gail India, Ranbaxy, Kotak
Mahindra Bank and HCL Technologies, while its shareholding remained almost unchanged in
companies like ONGC, Tata Steel, BHEL and Reliance Infra.
Among the Nifty companies, LICs holding in terms of value is estimated to be highest in ITC
(Rs 27,326 crore), followed by RIL (Rs 21,659 crore), ONGC (Rs 17,764 crore), SBI (Rs 17,058
crore), L&T (Rs 16,800 crore), and ICICI Bank (Rs 10,006 crore)

Employees and agents

Class-I Officers
Class-II Development
Officers

Total

No.

Number

Women

31,420

6,292

26,621

1,033

Class III/IV employees 62,347

17,542

of

Total

1,20,388

24,867

MONEY BACK POLICY

FEATURES
Unlike ordinary endowment insurance plans where the survival benefits are payable only at the
end of the endowment period, this scheme provides for periodic payments of partial survival
benefits as follows during the term of the policy, of course so long as the policy holder is alive.
In the case of a 20-year Money-Back Policy (Table 75), 20% of the sum assured becomes
payable each after 5, 10, 15 years, and the balance of 40% plus the accrued bonus become
payable

at

the

20th

year.

For a Money-Back Policy of 25 years (Table 93), 15% of the sum assured becomes payable each
after 5, 10, 15 and 20 years, and the balance 40% plus the accrued bonus become payable at the
25th

year.

An important feature of this type of policies is that in the event of death at any time within the
policy term, the death claim comprises full sum assured without deducting any of the survival
benefit amounts, which have already been paid. Similarly, the bonus is also calculated on the full
sum assured.

LIC's New Money Back Plan-20 years is a participating non-linked plan which offers an
attractive combination of protection against death throughout the term of the plan along with the
periodic payment on survival at specified durations during the term. This unique combination
provides financial support for the family of the deceased policyholder any time before maturity
and lump sum amount at the time of maturity for the surviving policyholders. This plan also
takes care of liquidity needs through its loan facility.
Benefits:
Death benefit: On death during the policy term provided the policy is in full force, death benefit,
defined as sum of Sum Assured on Death and vested Simple Reversionary Bonuses and Final
Additional Bonus, if any, shall be payable. Where, Sum Assured on Death is defined as
higher of 125% of the Basic Sum Assured or 10 times of annualized premium. This death benefit
shall not be less than 105% of the total premiums paid as on date of death.
The premiums mentioned above exclude tax, extra premium and rider premium, if any.
Survival Benefits: In case of Life Assured surviving to the end of the specified durations 20% of
the Basic Sum Assured at the end of each of 5th, 10th & 15th policy year.
Maturity Benefit: In case of Life Assured surviving the stipulated date of maturity, 40% of the
Basic Sum Assured along with vested Simple Reversionary Bonuses and Final Additional Bonus,
if any, shall be payable.
Participation in Profits: The policy shall participate in profits of the Corporation and shall be
entitled to receive Simple Reversionary Bonuses declared as per the experience of the
Corporation,

provided

the

policy

is

in

full

force.

Final Additional Bonus may also be declared under the policy in the year when the policy results
into a claim either by death or maturity, provided the policy has run for certain minimum term.
Optional Benefit:
LICs Accidental Death and Disability Benefit Rider: LICs Accidental Death and Disability
Benefit Rider can be opted for under an inforce policy at any time within the premium paying

term by payment of additional premium and the cover will be available throughout the policy
term provided the Policy is inforce for the full Sum Assured as on date of accident. In case of
accidental death, the Accident Benefit Sum Assured will be payable as lumpsum along with the
death benefit under the basic plan. In case of accidental permanent disability arising due to
accident (within 180 days from the date of accident), an amount equal to the Accident Benefit
Sum Assured will be paid in equal monthly instalments spread over 10 years and future
premiums for Accident Benefit Sum Assured as well as premiums for the portion of Basic Sum
Assured which is equal to Accident Benefit Sum Assured under the policy, shall be waived.
BENEFIT ILLUSTRATION
Statutory

warning:

Some benefits are guaranteed and some benefits are variable with returns based on the future
performance of your Insurer carrying on life insurance business. If your policy offers guaranteed
returns then these will be clearly marked guaranteed in the illustration table on this page. If
your policy offers variable returns then the illustrations on this page will show two different rates
of assumed future investment returns. These assumed rates of return are not guaranteed and they
are not the upper or lower limits of what you might get back, as the value of your policy is
dependent on a number of factors including future investment performance.

Notes:
This illustration is applicable to a standard (from medical, life style and occupation point of
view) life.
The non-guaranteed benefits (1) and (2) in above illustration are calculated so that they are
consistent with the Projected Investment Rate of Return assumption of 4% p.a. (Scenario 1) and
8% p.a. (Scenario 2) respectively. In other words, in preparing this benefit illustration, it is
assumed that the Projected Investment Rate of Return that LICI will be able to earn throughout
the term of the policy will be 4% p.a. or 8% p.a., as the case may be. The Projected Investment
Rate of Return is not guaranteed.
The main objective of the illustration is that the client is able to appreciate the features of the
product and the flow of benefits in different circumstances with some level of quantification.
SECTION

45

OF

INSURANCE

ACT,

1938:

No policy of life insurance shall after the expiry of two years from the date on which it was
effected, be called in question by an insurer on the ground that a statement made in the proposal
for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any
other document leading to the issue of the policy, was inaccurate or false, unless the insurer
shows that such statement was on a material matter or suppressed facts which it was material to
disclose and that it was fraudulently made by the policyholder and that the policyholder knew at
the time of making it that the statement was false or that it suppressed facts which it was material
to disclose.
Provided that nothing in this section shall prevent the insurer from calling for proof of age at any
time if he is entitled to do so, and no policy shall be deemed to be called in question merely
because the terms of the policy are adjusted on subsequent proof that the age of the life assured
was incorrectly stated in the proposal.

PROHIBITION OF REBATES (SECTION 41 OF INSURANCE ACT, 1938):

No person shall allow or offer to allow, either directly or indirectly, as an inducement to any
person to take out or renew or continue an insurance in respect of any kind of risk relating to
lives or property in India, any rebate of the whole or part of the commission payable or any
rebate of the premium shown on the policy, nor shall any person taking out or renewing or
continuing a policy accept any rebate, except such rebate as may be allowed in accordance with
the published prospectuses or tables of the insurer: provided that acceptance by an insurance
agent of commission in connection with a policy of life insurance taken out by himself on his
own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this
sub-section if at the time of such acceptance the insurance agent satisfies the prescribed
conditions establishing that he is a bona fide insurance agent employed by the insurer.
Any person making default in complying with the provisions of this section shall be punishable
with fine which may extend to five hundred rupees.
Eligibility Conditions and Other Restrictions:
For Basic plan
1. Minimum Basic Sum Assured

: Rs. 100,000

2. Maximum Basic Sum Assured

: No Limit

(The Basic Sum Assured shall be in multiples of Rs. 5000/-)

3. Minimum Age at entry for Life Assured

: 13 years (completed)

4. Maximum Age at entry for Life Assured

: 45 years (nearest birthday)

5. Maximum Maturity Age for Life Assured : 70 years (nearest birthday)

6. Term
7. Premium paying term

: 25 years
: 20 years

For LICs Accidental Death and Disability Benefit Rider

8. Minimum Accident Benefit Sum Assured : Rs. 100,000
9. Maximum Accident Benefit Sum Assured :

An amount equal to the Sum

Assured under the Basic Plan subject to the maximum of Rs.50 lakh Accident
Benefit Sum Assured taking all existing policies of the Life Assured under
individual as well as group schemes including policies with in-built accident
benefit taken with Life Insurance Corporation of India and the Accident Benefit
Sum Assured under the new proposal into consideration.
(The Accident Benefit Sum Assured shall be in multiples of Rs. 5000/-)
10. Minimum Age at entry for Life Assured : 18 years (completed)
11. Maximum Age at entry for Life Assured : The cover can be opted for at any
policy anniversary during the premium paying term.
12. Maximum cover ceasing age

: 70 years (nearest birthday)

2. Payment of Premiums:
Premiums can be paid regularly at yearly, half-yearly, quarterly or monthly mode
(through ECS only) or through salary deductions over the term of policy.
However, a grace period of one month but not less than 30 days will be allowed for
yearly, half-yearly, quarterly modes and 15 days for monthly mode of premium payment.
3. Sample Premium Rates:
Following are some of the sample tabular annual premium rates (exclusive of service tax)
per Rs. 1000/- Basic Sum Assured:

Age(in years)

Premium

(Rs.)

20

60.00

30

61.45

40

65.95

45

70.15

4. Mode and High S.A. Rebates:

Mode

Rebate:

Yearly

mode

Half-yearly

mode

Quarterly & Salary deduction

High
1,
2,

Sum

00,000
00,000

to

5, 00,000 and above

1,
4,

1%

(B.S.A)

of

Tabular

Premium
premium

Rebate:
Rebate

95,000
95,000

Tabular

Assured
Assured

to

of

NIL

Sum

Basic

2%

(Rs.)

2.00

Nil
%o

B.S.A.

3.00%o B.S.A.

5. Revival:
If premiums are not paid within the grace period then the policy will lapse. A lapsed
policy can be revived within a period of 2 consecutive years from the date of first unpaid
premium but before the date of maturity by paying all the arrears of premium together
with interest (compounding half-yearly) at such rate as fixed by the Corporation from
time to time subject to submission of satisfactory evidence of continued insurability.

The Corporation reserves the right to accept at original terms, accept at revised terms or
decline the revival of a discontinued policy. The revival of discontinued policy shall take
effect only after the same is approved by the Corporation and is specifically
communicated to the Policyholder
Revival of rider(s), if opted for, will be considered along with revival of the Basic Policy
and not in isolation.
6. Paid-up Value
If at least three full years premiums have been paid and any subsequent premiums be not
duly paid, this policy shall not be wholly void, but shall continue as a paid-up policy. The
Basic Sum Assured under the policy shall be reduced to such a sum, called Paid-up Sum
Assured and shall be equal to [(Number of premiums paid / Total Number of premiums
payable) x Basic Sum Assured] less Total amount of survival benefits already paid under
the policy.
The policy so reduced shall thereafter be free from all liabilities for payment of the
premiums, but shall not be entitled to participate in future profits. However, the vested
Simple Reversionary Bonuses shall remain attached to the reduced paid-up policy.
Notwithstanding the benefits available under a fully inforce policy, in the case of a
reduced paid up policy, no survival benefits shall be payable and the paid-up value along
with the vested Simple Reversionary Bonuses, if any, shall be payable only in lump-sum
on the expiry of policy term or death of life assured, if earlier.
Rider(s) shall not acquire any paid-up value and the rider benefits cease to apply, if policy
is in lapsed condition.
7. Surrender Value:
The policy can be surrendered for cash provided atleast three full years premiums have
been paid. The Guaranteed Surrender value shall be percentage of total premiums paid
(net of service tax) excluding extra premiums and premiums for riders, if opted for less

any survival benefits already paid. This percentage will depend on the policy year in
which the policy is surrendered and specified as below:

10

paid

0.00

0.00

30.00

50.00

50.00

50.00

50.00

51.76

53.53

55.29

Policy Year

11

12

13

14

15

16

17

18

19

20

paid

57.06

58.82

60.59

62.35

64.12

65.88

67.65

69.41

71.18

72.94

Policy Year

21

22

23

24

25

74.71

76.47

78.24

80.00

80.00

Policy Year
% applicable
to

total

premiums

% applicable
to

total

premiums

% applicable
to

total

premiums
paid

In addition, the surrender value of any vested Simple Reversionary Bonuses, if any, shall
also be payable, which is equal to accrued bonuses multiplied by the surrender value
factor applicable to accrued bonuses. These factors will depend on the policy year in
which the policy is surrendered and specified as below:

10

vested bonuses

0.00

0.00

15.28 15.42 15.55 15.72 15.93 16.22 16.58 17.03

Policy Year

11

12

13

Policy Year
% applicable to

14

15

16

17

18

19

20

% applicable to
vested bonuses

18.58 17.58 17.66 17.85 18.16 18.60 19.18 19.93 20.85 21.99

Policy Year

21

22

23

24

25

% applicable to
vested bonuses

23.38 25.05 27.06 30.00 35.00

Corporation may, however, pay Special Surrender value, if it is more favorable to the
Policyholder.
8. Policy Loan:

Loan can be availed under the policy provided the policy has acquired a surrender value
and subject to the terms and conditions as the Corporation may specify from time to time.
9. Taxes:
Taxes including Service Tax, if any, shall be as per the Tax laws and the rate of tax shall
be

as

applicable

from

time

to

time.

The amount of tax as per the prevailing rates shall be payable by the Policyholder on
premiums including extra premiums, if any. The amount of tax paid shall not be
considered for the calculation of benefits payable under the plan.
10. Cooling-off period:
If the Policyholder is not satisfied with the Terms and Conditions, policy may be
returned to us within 15 days from the date of receipt of the policy bond stating the
reasons of objections. On receipt of the same the Corporation shall cancel the policy and
return the amount of premium deposited after deducting proportionate risk premium (for
basic plan and rider(s) if any) for the period on cover, expenses incurred on medical
examination, special reports, if any and stamp duty charges.
11. Exclusion:
Suicide: - This policy shall be void

If the Life Assured (whether sane or insane) commits suicide at any time
within 12 months from the date of commencement of risk and the
Corporation will not entertain any claim under this policy except to the
extent of 80% of the premiums paid excluding any taxes, extra premium
and rider premiums, if any, provided the policy is inforce.

If the Life Assured (whether sane or insane) commits suicide within 12

months from date of revival, an amount which is higher of 80% of the
premiums paid till the date of death (excluding any taxes, extra premium
and rider premiums, if any,) or the surrender value, provided the policy is

inforce, shall be payable. The Corporation will not entertain any other
claim under this policy.
LIC's NEW MONEY BACK PLAN-25 YEARS
LIC's New Money Back Plan-25 years is a participating non-linked plan which offers an
attractive combination of protection against death throughout the term of the plan along with the
periodic payment on survival at specified durations during the term. This unique combination
provides financial support for the family of the deceased policyholder any time before maturity
and lump sum amount at the time of maturity for the surviving policyholders. This plan also
takes care of liquidity needs through its loan facility.
Benefits:
Death benefit: On death during the policy term provided the policy is in full force, death benefit,
defined as sum of Sum Assured on Death and vested Simple Reversionary Bonuses and Final
Additional Bonus, if any, shall be payable. Where, Sum Assured on Death is defined as
higher of 125% of the Basic Sum Assured or 10 times of annualized premium. This death benefit
shall not be less than 105% of the total premiums paid as on date of death.
The premiums mentioned above exclude tax, extra premium and rider premium, if any.
Survival Benefits: In case of Life Assured surviving to the end of the specified durations 15% of
the Basic Sum Assured at the end of each of 5th, 10th, 15th & 20th policy year.
Maturity Benefit: In case of Life assured surviving the stipulated date of maturity, 40% of the
Basic Sum Assured along with vested Simple Reversionary Bonuses and Final Additional bonus,
if any, shall be payable.
Participation in Profits: The policy shall participate in profits of the Corporation and shall be
entitled to receive Simple Reversionary Bonuses declared as per the experience of the
Corporation,

provided

the

policy

is

in

full

force.

Final Additional Bonus may also be declared under the policy in the year when the policy results
into a claim either by death or maturity provided the policy has run for certain minimum term.

Optional Benefit:
LICs Accidental Death and Disability Benefit Rider: LICs Accidental Death and Disability
Benefit Rider can be opted for under an inforce policy at any time within the premium paying
term by payment of additional premium and the cover will be available throughout the policy
term provided the Policy is inforce for the full Sum Assured as on date of accident. In case of
accidental death, the Accident Benefit Sum Assured will be payable as lumpsum along with the
death benefit under the basic plan. In case of accidental permanent disability arising due to
accident (within 180 days from the date of accident), an amount equal to the Accident Benefit
Sum Assured will be paid in equal monthly instalments spread over 10 years and future
premiums for Accident Benefit Sum Assured as well as premiums for the portion of Basic Sum
Assured which is equal to Accident Benefit Sum Assured under the policy, shall be waived.
However, on surrender of an inforce basic policy (which has acquired Surrender Value) to which
this rider is attached, a proportion of additional premium charged in respect of cover after
premium paying term shall be refunded.

Jeevan Surabhi
Jeevan Surabhi plan is similar to other money back plans.However main differences in regular
money
Maturity

back
term

plans
is

and
more

Jeevan
than

Surabhi
premium

are

as

under

paying

term.

Early
Risk

and

higher

rate

cover

of

increases

survival

benefit

every

five

payment.
years.

The actual term and the premium paying term for these plans are as under.
Plan

Policy

Premium

no.

Term

Term

106

15 years

12 years

107

20 years

15 years

108

25 years

18 years

Paying

Full sum assured is paid back as survival benefit by the end of premium paying term. However,
the risk cover and additional risk cover continue and the policy participates in profits till the end
of

policy

term.

Accident Benefit is restricted to the premium paying period and to the overall limit of Rs.5 lakhs
on

single

Suitable

life.
For:

This plan holds special interest to people who besides wishing to provide for their old age and
family feel the need for lump sum benefits at periodical intervals

LICs NEW CHILDRENS MONEY BACK PLAN

LIC's New Childrens Money Back Plan is a participating non-linked money back plan. This
plan is specially designed to meet the educational, marriage and other needs of growing children
through Survival Benefits. In addition, it provides for the risk cover on the life of child during

the policy term and for number of survival benefits on surviving to the end of the specified
durations.
The plan can be purchased by any of the parent or grand parent for a child aged 0 to 12 years.
1. Benefits:
Death benefit:
On death of the Life Assured before the stipulated Date of Maturity provided the policy is in full
force, then
On death of the Life Assured before the date of commencement of risk: Return of premium/s
excluding taxes, extra premium and rider premium, if any.
On death after the date of commencement of risk:
Death benefit, defined as sum of Sum Assured on Death and vested Simple Reversionary
Bonuses and Final Additional Bonus, if any, shall be payable. Where Sum Assured on Death
is defined as Higher of 10 times of annualized premium or Absolute amount Assured to be paid
on Death i.e. Basic Sum Assured.
This death benefit shall not be less than 105% of the total premiums paid as on date of death.
The premiums mentioned above exclude taxes, extra premium and rider premium, if any.
Survival Benefit: On the Life Assured surviving the policy anniversary coinciding with or
immediately following the completion of ages 18 years, 20 years and 22 years, 20% of the Basic
Sum Assured on each occasion shall be payable, provided the policy is in full force.
Maturity Benefit: On the Life assured surviving the stipulated date of maturity, provided the
policy is in full force, Sum Assured on Maturity ( which is 40% of the Basic Sum Assured) along
with vested Simple Reversionary Bonuses and Final Additional Bonus, if any, shall be payable.
Participation in Profits: The policy shall participate in profits of the Corporation and shall be
entitled to receive Simple Reversionary Bonuses declared as per the experience of the
Corporation, provided the policy is in full force.
Final Additional Bonus may also be declared under the policy in the year when the policy results
into a claim either by death or maturity.
2. Optional Benefit:
a) Option to defer the Survival Benefit(s): The policyholder will have option to take the survival
benefit at any time on or after its due date but during the currency of the policy. In case of

deferment of a due survival benefit (s) opted by the policyholder, the Corporation will pay
increased survival benefit (s) equal to
Survival Benefits % * Sum Assured * (Factor applicable to Survival Benefit (s))
These factors are enclosed as Annexure I.
This option shall be required to be intimated in writing by the policyholder six months before the
due date of the Survival Benefit to the servicing branch of policy.
b) LICs Premium Waiver Benefit Rider (UIN: 512B204V01): LICs Premium Waiver Benefit
Rider is available as an optional rider on the life of proposer aged between ages 18 to 55 years by
payment of additional premium. In case of death of the proposer, the premiums under the basic
plan falling due after the date of death shall be waived. The cost of medical and special reports
shall be borne by the proposer. This rider shall not operate in the event of death of the proposer
by his own hands whether sane or insane within 12 months from the date of issuance of First
Premium receipt or within 12 months from the date of revival.

LIC's JEEVAN TARUN

LIC's JEEVAN TARUN is a participating non-linked limited premium payment plan which
offers an attractive combination of protection and saving features for children. This plan is
specially designed to meet the educational and other needs of growing children through annual
Survival Benefit payments from ages 20 to 24 years and Maturity Benefit at the age of 25 years.
It is a flexible plan wherein at proposal stage the proposer can choose the proportion of Survival
Benefits to be availed during the term of the policy as per the following four options:

Option

Survival Benefit

Option 1 No survival benefit

Maturity Benefit

100% of Sum Assured

Option 2 5% of Sum Assured every year for 5 75% of Sum Assured

years

Option 3 10% of Sum Assured every year for 5 50% of Sum Assured
years

Option 4 15% of Sum Assured every year for 5 25% of Sum Assured
years

Where, Survival Benefit is the annual payment of a fixed percentage of Sum Assured (as defined
in the table above) every year starting from policy anniversary coinciding with or following the
completion of 20 years of age and thereafter on each of the next 4 policy anniversaries and
Maturity Benefit is a fixed percentage of Sum Assured (as defined in the table above) along with
vested Simple Reversionary Bonuses and Final Additional Bonus, if any, on maturity.
The chosen option shall become a part of the policy contract and no further change in option
shall be allowed.
In addition, this plan also takes care of liquidity needs through its loan facility.
The plan can be purchased by any of the parent or grand parent for a child aged 0 to 12 years.

Benefits available under an inforce policy:

Death
On

Benefit:
death

during

the

policy

term

(before

commencement

of

risk):

In case of death of the Life Assured, return of premium/s paid excluding taxes, extra premium
and rider premium, if any, without interest shall be payable.
On

death

during

the

policy

term

(after

commencement

of

risk):

In case of death during the policy term provided all due premiums have been paid Death Benefit,
defined as sum of Sum Assured on Death and vested Simple Reversionary Bonuses and Final
Additional Bonus, if any, shall be payable. Where Sum Assured on Death is defined as
Higher of 10 times of annualized premium or Absolute amount Assured to be paid on Death i.e.
125% Sum Assured.
This Death Benefit shall not be less than 105% of the total premiums paid as on date of death.
The premiums mentioned above exclude taxes, extra premium and rider premium, if any.
Survival Benefit: A fixed percentage of Sum Assured shall be payable on each policy
anniversary coinciding with or immediately following the completion of 20 years of age and
thereafter on each of next four policy anniversaries. These fixed percentages shall depend on the
Option chosen at the proposal stage and for various Options the percentages are as given below:

Policy

Anniversary Percentage of Sum Assured to be paid as Survival Benefit

coinciding/

following Option 1

Option 2

Option 3

Option 4

completion of ages

20 to 24 years

Nil

5% each year 10% each year

15% each year

Policyholder has to opt for any one of the options above at the proposal stage only.
Maturity Benefit: In case of Life Assured surviving the stipulated date of maturity, a fixed
percentage of Sum Assured shall be payable on maturity for inforce maturing policies. The fixed
percentage under different Options is as below:

Maturity Age

Option 1

Option 2

Option 3

Option 4

25 year

100%

75%

50%

25%

In addition to the above, vested Simple Reversionary Bonuses and Final Additional Bonus, if
any, shall also be payable.
Participation in Profits: The policy shall participate in profits of the Corporation and shall be
entitled to receive Simple Reversionary Bonuses declared as per the experience of the
Corporation, provided the policy is inforce.
Final Additional Bonus may also be declared under the policy in the year when the policy results
into a claim either by death or maturity.

CONCLUSION
Life insurance policies create an estate. At any point of time, the value of any other type of
savings is the total accumulation in that account only. If the other type of savings holders
unfortunately dies, the amount available to the dependent is that accumulation only. In case of
Life insurance, the moment a policy is taken, an estate is created to the extent of the sum assured
under the policy i.e., if the policy owner dies, what becomes payable to the dependents is the
sum assured (the total value of the estate) and not the total premium paid.Life insurance policies
cannot be attached by any Court of Law or Income Tax authorities. A married man can take a
policy under Married womens Property Act for the benefit of his wife and /or children
separately and create separate estates for their benefits. Once a policy is obtained under this
legislation, the policyholder will not have any hold or right over it. Life insurance thus can be
used as a gift to the near and dear.If immediate liquid cash is needed, a policy of Life insurance
can be assigned to the Life insurance Company, a Bank or any other financial institutions as
security for loan. V thus acts as an Emergency Fund. Banks today grant Educational Loans to
students for higher education. They insist on a Life insurance policy as a collateral security.