LIC Full Form and Definition
LIC stands for Life Insurance Corporation of India. It started its operations as a corporate firm in September 1956 after the Life Insurance of India Act was passed by India’s Parliament in June 1956. The LIC Act came into effect from July 1956. It helped in the nationalization of the private insurance industry in India. LIC of India was formed by merging 154 life insurance companies, 16 foreign companies and 75 provident companies. It is one of the largest financial institutions in India. It has an asset value of over 2,529,390 crores. The headquarters of LIC is in Mumbai, Maharashtra.
The main slogan of LIC is- “Yogakshemam Vahamyaham” meaning “Your welfare is our responsibility”. It is in Sanskrit and is obtained from the 22nd verse of the Bhagavad Gita’s 9th chapter. The chairman of Life Insurance of India is Mr M.R Kumar.
Role of LIC in Indian Economy
LIC is known as India's largest government-owned life insurance and investment corporation. The main role of LIC is to invest in global financial markets and different government securities after gathering funds from people through their various life insurance policies. At least 75% of these gathered funds are to be invested in Central and State Government securities, as stated by one of the LIC rules.
Functions of LIC
The major functions of LIC are as follows:-
Collect people’s savings in exchange for an insurance policy and promote savings in the country.
Protect the capital of the people by investing funds into government securities.
Issue insurance policies at affordable rates
Provide various loans like direct loans to industries, housing loans, loans to various national projects at reasonable interest rates.
Objectives of LIC
LIC aims to spread awareness about the importance of life insurance among people living in rural areas and people who are a part of socially and economically backward classes.
It aims to meet several life insurance needs of the community people who are subjected to change with the changing social and economic environment.
It aims to conduct business economically while taking into consideration that the money belongs to the policyholders.
It aims to maximize the mobility of people’s savings through attractive insurance-linked savings.
It aims in providing utmost job satisfaction to all the agents and employees of the corporation and promotes building a co-operative work environment to deliver efficient service with courtesy to its insured public.
It aims to deploy the funds to the best advantage of the investors and the community as well.
Types of LIC Life Insurance Plans
LIC provides numerous schemes to its policyholders. It offers different schemes for different categories and segments of the Indian economy. It is the largest insurance policy company in terms of the number of policies it has issued to date. Some of the policies are as follows:-
LIC’s Jeevan Pragati
LIC’s Jeevan Labh
LIC’s Single Premium Endowment Plan
LIC’S Jeevan Lakshya
LIC’s Jeevan Tarun
What are the Basic Policies of the Life Insurance Corporation of India?
The basic policies in Life Insurance Corporation of India (LIC) are term insurance, cash value insurance, straight life insurance, and limited payment life insurance. The details of each of these policies are given below:
Term insurance: This insurance is like an insurance protection contract, similar to auto insurance, home insurance, or health insurance. Therefore, it ensures the individual against any risk of financial loss in case of death and does not include any savings plan. In this insurance policy, the owner buys a fixed amount of coverage and pays an annual premium based on their age. The policy is for a fixed period of time and thus the coverage stops if it is not renewed. These policies are available for five years, ten years or fifteen years where the amount of premium to be paid remains constant. The life insurance can also be purchased with a condition of 65 years of age, that is, the insured does not become 65 years of age and in this case, the amount of premium to be paid increases annually. There is decreasing term life insurance also available wherein the coverage of the insurance decreases with time so that the annual premium to be paid remains constant. Term insurances provide maximum coverage to the premium spent.
Cash value insurance: In this kind of policy, the amount of actual insurance decreases over time and the savings component of the policy increases over time. This type of insurance is funded by the premium payments done by the insured along with the earnings of the saving element in the policy. These insurance policies are of two types: straight life policy and a limited payment policy that provides coverage to the insured throughout life.
Straight life insurance: the insurance is throughout life. In this type of insurance, the amount of protection decreases as the savings amount increases, though the total coverage of the policy that includes the protection and savings elements remains the same. The premium in these policies is higher than the term insurance which is based on the age of the individual when he or she buys insurance. The premium for this policy remains constant. The face value of insurance refers to the amount which is paid when the insured person dies.
Limited payment life insurance: in this type of policy the insured person pays the total amount of policy in a limited number of years, that is, usually 20 to 30 years or by the age of 65. After the completion of the term, the policy remains active for the whole life of the insured if he or she has not withdrawn the amount at any point in time. The amount of premium to be paid every year in this policy is obviously higher than the straight life policy.
Did You Know?
The first company in India that provided insurance coverage was The Oriental Life Insurance Company, established in 1818, in Kolkata. Surendranath Tagore founded the Hindustan Insurance Society which later became Life Insurance Company.
Solved Examples
LIC was Established in Which Year?
June 1956
September 1956
July 1956
October 1956
Ans: (b) September 1956
2. Where is LIC Headquartered in?
Kolkata
Pune
Mumbai
Chennai
Ans: (c) Mumbai
FAQs on LIC- Life Insurance Corporation of India
1. What are the Benefits of Buying from Life Insurance Corporation?
The benefits of buying from Life Insurance Corporation of India are:-
The policyholder will get the most advanced and efficient service as they are associated with an industry leader which has a technologically advanced network throughout the industry.
Maximum benefits are ensured to the policyholder and their family by designing innovative plans.
LIC provides an effortless and simple claim procedure for the policyholder when needed.
It has an excellent customer support service that provides 100% grievance settlement facilities.
It also provides online customer service to make the lives of policyholders easier. One can get the entire details of their policy via SMS.
2. What are the Processes of Maturity Claim and Death Claim of Life Insurance Company of India?
The maturity claim process of LIC of India is:-
A letter is sent by the branch office that serves the policyholder two months before the maturity date.
The policyholder is required to respond with a duly filled ‘Discharge form’ along with the original copy of the policy document.
The branch office upon receiving of these two documents sends a post-dated cheque via post to the policyholder.
Suppose the insured person dies before the date of maturity. In that case, the branch office asks for the claimant’s statement including details of the claimant and the deceased, original copy of policy document, death certificate of the deceased, documentary proof of age.
3. What protection can I get from Life Insurance?
Life insurance is an essentiality in today’s time. Since, for the survival of life, one needs money for all day-to-day activities, thus life insurance protects one from any financial disaster that destroys the complete income of a family. In other words, life insurance provides one with security that if a certain part of family income or the complete income of the family is cut off because of death, then life insurance would provide funds that can look after the family needs and also replaces the services that otherwise the family member would have provided like child care and more.
4. What should one consider while buying life insurance?
It is very important for a family to consider their financial needs when buying life insurance. These considerations include expenses related to the death of a family member like funeral expenses, medical expenses which are not covered by health insurance, expenses for estate settlement, and readjustment expenses like relocation of the family, and more. The family should also consider their day-to-day expenses like clothing and food. Families should also consider if they have any payments or debts like car loans or farm debt along with special needs of the family like loans, educational expenses, and gifts to family, friends or organizations. The person getting his or her life insurance should also take into account the retirement income for the surviving spouse.
5. How can I assess my needs while getting life insurance?
It is very important for an individual to assess his needs carefully while getting life insurance. While a person getting his or her life insurance should consider their total financial needs and other available resources. The needs of a family depend upon the number of dependents in his family and their ages. The standard of living of a family is another factor that will help him assess his needs and he should also consider other financial resources like savings, social security, investments, earning capacity of the dependants available in a family.