LIC Single Premium Endowment Plan – Dissection, Analysis and Review
You need to save regularly over a specific period to accumulate a significant corpus that you can enjoy at maturity. The savings component in endowment plans makes them an investment option.
Can these endowment life insurance plans be relied on as a good investment option to fulfill your financial goals? Could LIC Single Premium Endowment plan be considered the best financial tool that can help you achieve your milestones?
In this review article, let us analyse the Advantages(pros) and Disadvantages(cons) of the LIC Single Premium Endowment plan and this will give you clarity on whether the LIC Single Premium Endowment Plan is a Good or Bad Investment choice that you can make.
Let’s get started!
1.)What is the LIC Single Premium Endowment Plan?
2.)What are the Features of the LIC Single Premium Endowment Plan?
3.)Who is Eligible for the LIC Single Premium Endowment Plan
4.)Review of Benefits under LIC Single Premium Endowment Plan
5.)What are the Advantages of the LIC Single Premium Endowment Plan?
6.)What are the Disadvantages of the LIC Single Premium Endowment Plan?
7.)Free-Look period of LIC Single Premium Endowment Plan
8.)Surrendering LIC Single Premium Endowment Plan
9.)Research Methodology of LIC Single Premium Endowment Plan
10.)LIC Single Premium Endowment Plan vs. Other Investment Options
11.) LIC Single Premium Endowment Plan Vs. Other Investment Options – Review Conclusion
12.) Final verdict on LIC Single Premium Endowment Plan – Good or Bad?
It’s a participating individual life assurance savings plan that’s non-linked. It presents an alluring blend of features for security and savings. The premium is paid in full at the time the policy is issued.
You can find the complete policy details in the brochure here
| Minimum entry age | 90 days (completed) |
| Maximum entry age | 65 years (nearest birthday) |
| Minimum age at maturity | 18 years (completed) |
| Maximum maturity age | 75 years |
| Minimum policy term | 10 years |
| Maximum policy term | 25 years |
| Minimum Sum Assured | 50,000 |
| Maximum Sum assured | No Limit |
| Premium payment mode | Single Premium only |
On death during the policy term, the following is payable to the nominee, Sum Assured along with vested Simple Reversionary Bonuses and Final Additional Bonus, if any. Where “Sum Assured on Death” is defined as a higher of
On Life Assured surviving the policy term, Sum Assured on Maturity, along with vested Simple Reversionary Bonuses and Final Additional Bonus if any, shall be payable. Where “Sum Assured on Maturity” is equal to Basic Sum Assured.
The LIC Single Premium Endowment policy will share the company’s profits and be eligible for Simple Reversionary Bonuses, which will be determined based on the experience of the Corporation.
The final (Additional) Bonus may also be declared under the policy in the year when the policy results in a claim either by death or maturity.
If the LIC Single Premium Endowment policyholder is not satisfied with the Terms and Conditions of the policy, the policy may be returned to the Corporation within 15 days from the date of receipt of the policy stating the reason for objections.
The LIC Single Premium Endowment policy can be surrendered at any time during the policy year. The Corporation will pay the Surrender Value upon policy surrender, whichever is higher—the Guaranteed Surrender Value or the Special Surrender Value.
The long-term safety of capital, guarantee of returns, and liquidity of the investment option need to be assessed. Will LIC Single Premium Endowment Plan help to achieve your financial goals? To find the answer to this question, let us analyse the return component of this plan. The Internal Rate of Return of this plan calculation will decipher the suitability of the plan.
A 35-year-old male buys LIS Single Premium Endowment Plan for a Sum Assured of ₹ 20 Lakhs. The single premium for the plan is ₹ 12,29,600. The policy term is 15 years.
| Male | 35 years |
| Policy Term | 15 years |
| Sum Assured | 20,00,000 |
| Annualised premium | 12,29,600 |
The LIC Single Premium Endowment policy matures after 15 years. The Maturity Benefit includes non-guaranteed benefits. The Non-Guaranteed benefits in the above illustration are calculated with the Projected Investment Rate of Return assumption of 4% p.a. (Scenario 1) and 8% p.a. (Scenario 2). The value of your policy depends on several things, including actual future investment performance, therefore the Projected Investment Rate of Return is not guaranteed, nor are they the top or lower limits of what you might earn back.
| At 4% p.a. | At 8% p.a. | ||||
| Age | Year | Annualised premium / Maturity Benefit | Death Benefit | Annualised premium / Maturity Benefit | Death Benefit |
| 35 | 1 | -12,29,600 | 20,00,000 | -12,29,600 | 20,00,000 |
| 36 | 2 | 0 | 20,00,000 | 0 | 20,00,000 |
| 37 | 3 | 0 | 20,00,000 | 0 | 20,00,000 |
| 38 | 4 | 0 | 20,00,000 | 0 | 20,00,000 |
| 39 | 5 | 0 | 20,00,000 | 0 | 20,00,000 |
| 40 | 6 | 0 | 20,00,000 | 0 | 20,00,000 |
| 41 | 7 | 0 | 20,00,000 | 0 | 20,00,000 |
| 42 | 8 | 0 | 20,00,000 | 0 | 20,00,000 |
| 43 | 9 | 0 | 20,00,000 | 0 | 20,00,000 |
| 44 | 10 | 0 | 20,00,000 | 0 | 20,00,000 |
| 45 | 11 | 0 | 20,00,000 | 0 | 20,00,000 |
| 46 | 12 | 0 | 20,00,000 | 0 | 20,00,000 |
| 47 | 13 | 0 | 20,00,000 | 0 | 20,00,000 |
| 48 | 14 | 0 | 20,00,000 | 0 | 20,00,000 |
| 49 | 15 | 0 | 20,00,000 | 0 | 20,00,000 |
| 20,00,000 | 20,00,000 | 30,00,000 | 20,00,000 | ||
| IRR | 3.30% | 6.13% | |||
At the assumed investment rate of 4%, the Final Maturity Value is ₹ 20 Lakhs and the IRR(Internal rate of return i.e. Interest rate) calculated for this cash flow results in 3.30%. At the assumed investment rate of 8%, the Final Maturity Value is ₹ 30 Lakhs and the IRR calculated for this cash flow results in 6.13%.
These Maturity Values at the end of 15 years will lose their value due to inflation. Already the plan faces liquidity issues and apart from that, the return on investment is below par. So, the liquidity and return of the LIC Single Premium Endowment plan are not beneficial for a long-term investor.
Now, let us compare the returns of the LIC Single Premium Endowment Plan with other investment returns. LIC Single Premium Endowment Plan fulfills the dual need for a life cover and savings under a single plan. So, we need to meet both these needs with the same lumpsum amount.
A Pure Term Policy for ₹ 20 Lakhs Sum Assured would cost ₹ 85,000 (Single premium). The policy term is 15 years. For the same metrics, the LIC Single Premium Endowment Plan costs ₹ 12.29 Lakhs. Term plans are much cheaper than endowment plans and they provide more coverage for lower premiums. For investment, you will be left with ₹ 11.44 Lakhs. Based on your personal risk appetite, choose an investment product.
| Pure Term Insurance Policy | |
| Policy Term | 15 years |
| Sum Assured | 20,00,000 |
| Annualised premium | 85,000 |
| Investment | 11,44,600 |
Here, the balance amount after paying the Pure-Term Life Insurance Policy is invested in an ELSS fund. While exiting the fund after 15 years, Capital Gains Tax is payable. Tax calculation is given below.
| Term insurance + ELSS | |||
| Age | Year | Term Insurance premium + ELSS | Death Benefit |
| 35 | 1 | -12,29,600 | 20,00,000 |
| 36 | 2 | 0 | 20,00,000 |
| 37 | 3 | 0 | 20,00,000 |
| 38 | 4 | 0 | 20,00,000 |
| 39 | 5 | 0 | 20,00,000 |
| 40 | 6 | 0 | 20,00,000 |
| 41 | 7 | 0 | 20,00,000 |
| 42 | 8 | 0 | 20,00,000 |
| 43 | 9 | 0 | 20,00,000 |
| 44 | 10 | 0 | 20,00,000 |
| 45 | 11 | 0 | 20,00,000 |
| 46 | 12 | 0 | 20,00,000 |
| 47 | 13 | 0 | 20,00,000 |
| 48 | 14 | 0 | 20,00,000 |
| 49 | 15 | 0 | 20,00,000 |
| 57,62,999 | 20,00,000 | ||
| IRR | 10.85% | ||
The Pre-Tax Maturity value is ₹ 62.65 Lakhs. The final value after tax is ₹ 57.62 Lakhs. This amount could be utilised for any of your life goals. In the above illustration, the calculation of IRR(Internal Rate of Return i.e. Interest Rate) for this cash flow results in 10.85%. The return on investment is higher than the inflation rate.
This IRR analysis shows that there are better alternate investments to park your lumpsum amount. Alternate investment offers better liquidity and returns when compared to the LIC Single Premium Endowment Plan.
Some of the features of LIC New Endowment Plan (Plan no.914) are,
You can read the complete review of the LIC New Endowment Plan (Plan no.914) here.
ii) LIC Single Premium Endowment Plan Vs. LIC Bima Ratna Plan
Let’s look at some of the advantages of LIC Bima Ratna Plan,
You can read the complete review of the LIC Bima Ratna Plan here.
We have compared the LIC Single Premium Endowment Plan with other investment options and as readers, you can find that Pure Term Insurance + ELSS or PPF is a better option compared to the LIC Single Premium Endowment Plan. This is because of the simple reason that the investment and insurance component is separate in the former when compared with the latter.
Apart from covering the life of the insured LIC Single Premium Endowment Plan helps the policyholder save regularly over a specific period so that he/she is able to get a lump sum amount on the LIC Single Premium Endowment policy maturity.
It provides the whole amount guaranteed to the policyholder upon policy maturity if they survive the period of the policy, or it is given to the beneficiaries if the insured passes away during the policy term.
This is a long-term investment, but the return is not beneficial for investors. if you are told otherwise by insurance agents you can be sure that it is solely for their agent commission. Investing in the LIC Single Premium Endowment Plan will result in difficulties in fulfilling your life goals.
Those who are interested in life cover and not in the saving component should rather go for a term plan. This is because term plans are much cheaper and provide more coverage for lower premiums than endowment plans, they are also simpler to understand.
For savings, choose products that suit your time horizon, risk appetite, and life goals. Are you someone who is searching for investment-related queries on social media platforms like Quora, Facebook, Twitter, etc? It is better to Consult your financial planner to build a custom-made investment portfolio.
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