Life Insurance Corporation (LIC) is one of the top insurance companies of India. It is also under the ownership of the Government of India.
Insurance is a significant sector, and LIC held a monopoly of it for a long time; even today, it covers a substantial chunk of the Indian insurance sector. Investors prefer buying regular LIC policies with primary benefits like getting back the sum assured with interest at the end of the policy.
But they can also get this in instalments, known as the Money-back Policy, which pays the investors the final benefit (every five years or so). These money-back policies come with higher premium rates as compared to regular policies like an endowment plan.
There are many benefits of the Money-back Policy:
- It comes with a bonus option, which ensures that the insured will get a bonus from the company in addition to the insured amount. Also, LIC provides an accidental death and disability benefit, which covers the death of the insured.
- It falls under the exempt category of taxes under government regulations, which means the interest earned is exempted from taxation while filing income tax returns
- The Money-back Policy is the normal endowment plan with the catch that a part of the final benefit is provided during the policy tenure itself and rest at the policy’s maturity.
Though this may look lucrative, one should keep in mind that the money-back policies provide a lower return rate than other policies, and if the insurer surrenders the policy, they get a low paid-up value. Also, periodic interest payouts reduce the compounding effect, which would add the earned interest to the principal and increase the total profit earning in normal scenarios.
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