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Thursday, August 25, 2011

LIC comes out with its new Single Premium Product

Not many companies remain so active during a pessimistic phase in the market as Life Insurance Corporation of India (LIC). Apart from investing heavily during these turbulent times, it now plans to launch a new product especially suited for the volatile market. The new product would be a single premium policy and is expected to be released in the month of September.A single premium policy is one where a lump sum payment is made into the policy in return for a death benefit. With this the cash invested builds up rapidly as the policy becomes fully funded. The size of the death benefit depends on the amount invested and the age and health of the insured. However these are relatively expensive.

LIC’s latest single premium policy comes after a gap of two and a half years when it launched “Jeevan Aastha”. The success of “Jeevan Aastha” clearly laid down that people prefer paying single payments against periodic payments albeit the higher costs incurred. For the records, “Jeevan Aastha” raised Rs 10,235 crore in just 45 days with around 1.8 million policies sold. With this new product LIC plans to raise in excess of Rs 10,000 crore because of the inclusion of 5-10 tenure term.

However experts and Financial Planners are skeptical of such policies. A simple math would show that investing in FD and using little bits of returns and capitals would generate better results.

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