Benefit Illustrations under LIC plans

Benefit Illustrations under LIC plans


The Insurance Regulatory and Development Authority (IRDA) requires all life insurance companies operating in India to provide benefit illustrations in respect of all their products which are either linked or participating products. Further these illustrations are to be provided w.e.f. 01/04/2004 and will be based on two rates of investment returns i.e. 6% & 10% p.a. The basis of investment return is to be fixed by Life Insurance Council each year. For 2004-05 the bases has been fixed at 6% and 10% p.a.

Accordingly, the benefit illustrations in respect of all such plans have been worked out based on 6% & 10% per annum investment return. Since Plan Nos.43, 52, 58, 164 (without-profits Term Assurance plans) and plan Nos.161 & 163 (Immediate Annuity plans) are non-participating, illustrations in respect of these plans have not been prepared.

The benefit illustrations for most of our major plans have already been put on LIC’s website. These benefit illustrations can be traced by pointing the cursor on the heading ‘Benefit’ in the product details. The illustrations will also be available from the intranet site of Actuarial Dept, Central Office very shortly. For the remaining plans, the illustrations will be put on the site shortly. This will make illustrations available in respect to all our plans currently open to New Business.

The Benefit Illustration contains two parts – the first part giving the key features of the plan and the second part containing the sample illustration of benefits.

The benefit illustrations have been worked out for a sample age and term. Some of the benefits under a plan may be guaranteed (e.g. Sum Assured, Guaranteed Additions etc.) and some may be variable (e.g. Bonus, Loyalty Additions etc.). The variable benefits may depend on the future experience of the Corporation with regard to investment return, mortality, expenses etc. The illustration assumes two rates of return (6% and 10% p. a.) as prescribed by the Life Insurance Council. However, the other assumptions such as Expenses, Mortality etc. used for the calculation of future benefits are based on our best estimates of the likely future experience.

The rows of the illustration table are the various durations running up to maturity / termination of the plan. There are columns for the
- Total premium paid up to that duration
- Benefits which are guaranteed (i.e. they do not depend on future experience)
- Benefits which are variable (i.e. Bonus, Loyalty additions appropriate to the two scenarios of 6% and 10% interest rates)
- Total of all benefits

The main objective of providing the illustration to the client is to give him an
appreciation of the likely future benefits of the plan under the two assumed scenarios for investment returns. However it may be made clear to the client that these are illustrations only and the benefits payable in the future will depend on our actual future experience in terms of investment rates, expenses, mortality etc. Future bonus will depend on future profits and as such is not guaranteed.

The illustrations are for the information of the customers. The same can be downloaded and a copy may be given to the field force and the customers, if they so desire.