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Tuesday, September 27, 2011

Important Information for LIC Policy Holder – providing bank mandate.

Dear (s)

Most likely that you have taken a Policy covering your life (if not, it is better you do it today itself).   Life entails risk, which is the possibility of loss.  Mankind generally looks to security and avoid uncertainty. If dying prematurely leaving a dependent family to fend for itself is bad, equally bad is that of living till old age without viable means of financial support.

Death is inevitable but a premature risk is often fraught with economic implications.  The family of the person is exposed to heavy financial turbulence  - perhaps that is the primary reason why people try to accumulate wealth (how some amass and still end up unsatisfied is a different topic altogether !)    Life insurance is a tool for risk management – a methodical way to deal with the risk of loss of life.   

The essence of insurance is the principle of indemnity, that the person who suffers a financial loss is placed in the same financial position after the loss as before the loss occurred. He neither profits nor is disadvantaged by the loss.  In Life Insurance, this cannot be practiced as accurately as done in General branch.  Here the indemnity or the payment gets limited to the amount of policy taken by the proposer.  It is done based on the economic value one attaches to thyself and may eventually prove to be inadequate also !    

General Insurance Policies are annual contracts -  Life Insurance policies are for longer periods.  Life insurance is a contract that pledges payment of a fixed amount (sum assured) to the policy holder (or his nominee) – upon a claim.  The claim could be arising out of an insured peril or by maturity of the policy.  Thus unlike all our Policies, all Life policies will result in payment of policy amount either on the date of maturity or on specified dates at periodic intervals or in the event of unfortunate event of the assured, if it occurs earlier.

The consideration (i.e., premium) is rarely collected in one lumpsum – but is paid throughout the currency of the policy at specified intervals, which can be annual, monthly, quaterly, bi-annual, as agreed upon.   The amount of premium payable is  actuarially created by calculating the relationships of mortality, interest, and expense, and the financial values resulting from each based on time.

Though there are many Life Insurers, the leader is  “Life Insurance Corporation of India” popularly known as LIC – the largest state owned company.  It funds close to 25% of Government’s expenses.  It was founded in 1956 with the merger of 243 Insurance companies and Provident societies.

Sure you have a Policy on your life with LIC of India.  If so, the following information is very relevant to you.

In order to ensure faster credit of policy moneys with greater security and privacy, L.I.C of India will be crediting all payments ( Survival Benefit, Maturity, Loan, Surrenders, payments of Pension & Group Schemes etc., ) directly to the Bank Account of the Policyholder / Beneficiary w.e.f 01/10/2011. This is also in accordance with the transparency drive of the Government of India.  The notification of LIC states that  it is not possible  for LIC to settle the policy payment in any other mode of payment like cheque.

LIC has requested all its policy holders to provide the Bank Account details by downloading the Policy e-payments NEFT mandate form.  The completed mandate forms  can be  handed over to any Branch office servicing at least one of the policy/policies listed in the mandate.   Once this is provided, the policy holder / claimant will get the credit in his own account on the due date of payment irrespective of the location of his bank. There will be no extra charges to the policy holders / claimant.       SMS and E-mail alerts would also  be provided wherever the policy payment is made to the policyholder/ claimants’ account through NEFT.
Besides filling up the mandate, the  policy holder / claimant should also submit either a cancelled blank cheque leaf or the photo copy of the page of the passbook / cheque book where details of the Bank account are mentioned.

If you are a Policy holder of LIC, do download the mandate by clicking this link :  LIC mandate

Regards – S. Sampathkumar.

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