Wednesday 16 November 2016

Postal Life Insurance (PLI) Vs LIC - Which is best?

Postal Life Insurance (PLI) Vs LIC - Which is best?

Do you know your Post Office also offers Life Insurance? Even if you know then there is a huge confusion among buyers like whether to buy with the Post Office or with LIC, because the Government of India backs both. Hence, let us see which is best for whom.

What is PLI (Postal Life Insurance)?
PLI (Postal Life Insurance) is exactly like any Life Insurance company, for example LIC or ICICI Pru Life Insurance. The only difference is, it is run and managed by Post Office. PLI currently offers only traditional plans. Therefore, no term insurance or ULIPs.

How many types of policies PLI (Postal Life Insurance) offers?
Currently PLI offers below mentioned traditional endowment products.

1) Whole Life Assurance Policy (Suraksha).
This is exactly like LIC's Whole Life Policy. The nominee will receive the accrued bonus and sum assured after the death of the policyholder. Minimum age at entry is 19 Yrs and maximum is 55 Yrs. Minimum Sum assured is Rs.20, 000 and maximum Sum Assured is Rs.10, 00,000.

2) Endowment Assurance (Santosh).
This is a typical endowment plan where a policyholder gets sum assured along with bonus if he survive until the maturity period. In case of his death during the policy period, then his nominee will receive the sum assured along with accrued bonus. Eligibility criteria are same as that of Whole Life Assurance Policy (Suraksha).

3) Convertible Whole Life Assurance (Suvidha).
This plan is exactly like Endowment Assurance. The only difference is, if you don't convert this policy to Endowment Assurance then it is treated as Whole Life Assurance plan.

4) Anticipated Endowment Assurance (Santosh).
This is typical money back endowment plan, where the maximum sum assured is restricted to Rs.5, 00,000. In this category, PLI offers two types of plans. One is 15 yrs and other is a 20 yr term.

5) Joint Life Assurance (Yugal Suraksha).
You can buy this policy with your spouse as co-insured. To avail this facility one the spouse must be eligible to buy PLI. Life Insurance coverage is for both husband and wife to the sum assured you bought. The maximum sum assured is Rs.1, 00,000.

6) Scheme for physically handicapped persons.
This plan is uniquely designed for handicapped persons. Based on the condition of handicap, premium raised or increased. Rest of plan features are exactly like the others.

7) Children Policy
PLI started to offer child policy from 2006. Few features are listed below.
  • It mainly covers the life insurance of children.
  • Maximum two children can be insured in a family.
  • Children between 5 Yrs to 20 Yrs are eligible for this plan.
  • Maximum Sum Assured is Rs.1,00,000.
  •  Premium waiver benefit in case of main policy holder dies.
  • In case of death of children, then sum assured along with bonus be payable to main policy holder.
  • Responsibility of premium payment rest with main policy holder.

So what is the difference between PLI and LIC?
  • Eligibility-To buy PLI you must be employee of the Central and State Governments, Central and State Public Sector Undertakings, Universities, Government aided Educational institutions, Nationalized Banks, Local bodies, etc. PLI also extends the facility of insurance to the  officers and staff of the Defense services and Para-Military forces. Where as LIC offers it's plans to all citizens of India. So when it comes to flexibility to buy then LIC holds edge than PLI.
  • Plans offered-There is no such difference. Because LIC and PLI mostly dependent on traditional endowment type of Life Insurance Plans. But along with that LIC offers term insurance (recently LIC launched online term insurance), which is not at all touched by PLI.
  • Premium Rate-When compare to LIC or any private insurers, PLI offers cheap premium. So this is a most advantage of buying endowment plans with PLI than with LIC.
  • Bonus Rate-Bonus offered by PLI is in the range of 7% or more. Whereas currently LIC offers a bonus rate of around 4% to 5%.
  • Where to buy-In case of PLI, you have to visit to the Post Office where these schemes are offered. Whereas in case of LIC, you will easily get agents. These agents can come to your doorstep and offer the service. Along with that recently LIC launched an online buying also (restricted to online term plan and pension plan). Therefore, in case of buying LIC offers more flexibility than PLI.
  • Age Limit-PLI offers insurance to the age group of 19-55 yrs. Where as in LIC you can get the insurance coverage up to 75 yrs (not in all policies).
  • Maximum Sum Assured-PLI offers you the maximum sum assured of Rs.50 Lakh. Whereas, LIC offers an unlimited maximum sum assured.
  • Premium Payment-You need to visit the Post Office to pay the premium dues. However, in case of LIC, you can pay it in branch, collection points or through online.
  • Tax benefits-Both PLI and LIC offer same tax benefit for deduction under Sec.80C.
Considering all these features and differentiation between PLI and LIC, I feel PLI is still in olden days. Because it offers less insurance coverage, entry is restricted to only few, service issues, no term insurance and age limit. Whereas only two positive points that attract you towards PLI are lesser premium and higher bonus.
Whether it is prudent to buy endowment plans from PLI?

Even though PLI offers you higher return and lower premium compare to LIC and other private insurers, the returns in the long run may erode drastically if you consider the inflation. Along with that, you will be under insured due to restricted maximum insurance limit. Post Offices still not customer friendly. So you may face service issues and claim settlement issues.(now improved) 

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