Lic Vs Postal Life Insurance- Which is best?

Do you know your Post Office also offers postal life insurance (PLI) coverage? Even if you know, then there is a huge confusion among buyers, like whether to buy with the Post Office or with the Life Insurance Corporation of India (LIC), because the Government of India backs both. So, let’s see which one is best?

What is Postal Life Insurance (PLI)?

PLI (postal life insurance) is exactly like any Life Insurance company, for example, LIC or SBI Life Insurance. Post Office runs postal life insurance. Postal Life Insurance currently offers only traditional policies. Therefore, no term insurance or ULIPs (unit-linked policies).

What are the different types of policies PLI (Postal Life Insurance) offers are?

Currently, PLI offers the following traditional endowment policies.

1) Endowment Assurance (Santhosh).

This is a typical endowment plan where a policyholder gets sum assured along with a bonus in case he survives until the maturity period. In case of his death during the policy period, then his nominee will get the sum assured along with an accrued bonus.

Eligibility criteria are the same as those of the Whole Life Assurance Policy (Suraksha).

2) Whole Life Assurance Policy (Suraksha).

This is exactly like LIC’s Whole Life Policy. The nominee will get the accrued bonus and sum assured after the death of the policyholder.

Minimum age at entry is 19 years, and the maximum age at entry is 55 years.

The sum assured is Rs. 20, 000, and the maximum sum assured is Rs. 10,00,000.

3) Convertible Whole Life Assurance (Suvidha).

This plan is exactly like Endowment Assurance. The only difference is that if you don’t convert this policy into endowment assurance, then it is treated as a whole-life assurance plan.

4) Anticipated Endowment Assurance (Santosh).

It is a typical money-back endowment plan, where the maximum sum assured is restricted to Rs. 5,00,000. Under this category, PLI offers two types of plans. One is 15 years, and another is a 20-year term.

5) Joint Life Assurance (Yugal Suraksha).

We can buy this policy with your spouse as a co-insured. To avail this facility one the spouse must be eligible to buy postal life insurance.

Both husband and wife will get insurance coverage in this policy. The maximum sum assured in this plan is Rs. 1,00,000.

6) Policy for physically handicapped persons.

Handicapped persons are insured under this plan. Based on the condition of the handicapped person, a premium was raised or increased. The rest of the plan features are exactly like the other plans.

7) Children Policy

Postal Life Insurance started to offer child policy from 2006.

• It mainly covers the life insurance for children.
• In a family maximum, two children can be insured in this plan.
• Children between 5 years and 20 years old are eligible for this policy.
• Maximum Sum Assured is up to Rs. 1,00,000.
•  A premium waiver benefit is there in case the main policyholder dies.
• In case of death of children, then the sum assured mentioned in the policy along with the bonus will be payable to the main policyholder.
• The responsibility for premium payment will be on the main policyholder.

 What is the difference between postal life insurance and LIC?

Eligibility for Postal Life Insurance:

To buy PLI (Postal Life insurance), you must be an employee of the Central and State Governments, Central and State Public Sector Undertakings, Universities, government-aided Educational institutions, Nationalized Banks, Local bodies, etc.

Postal Life Insurance also extends the facility of insurance to the officers and staff of the Defence Services and Paramilitary Forces. Whereas LIC of India offers its plans to all citizens of India. So when it comes to flexibility to buy then LIC of India holds an edge over PLI.

Plans offered Lic and PLI –

There is no such difference. Because of LIC of India and PLI  mostly dependent on traditional endowment type of Life Insurance policies. But along with that, Lic of India is offering “Term Life Insurance.”.

But PLI is not offering term life insurance. Lic recently started Online Term Life Insurance.

Premium Rates –

When compared to LIC or any private insurance company, PLI offers a cheap premium. So this is the biggest advantage of buying endowment plans with PLI compared with LIC of India.

Bonus Rate: The bonus offered by PLI Life Insurance is in the range of 7% or more. Whereas currently, Lic of India is offering around 4% to 5%.

Where to buy the policy:

In the case of PLI Life Life Insurance, you have to visit the Post Office where these schemes are offered. Whereas in the case of LIC, you easily get agents. These agents will come to your doorstep and offer the service. Along with that, recently LIC launched an online buying facility (restricted to online term plans and pension plans). Therefore, in the case of buying LIC of India, it offers more flexibility than PLI.

Age Limit–

PLI (Postal Life Insurance) offers insurance to the age group of 19-55 years. Whereas in LIC of India, we can get the insurance coverage up to 75 years (in all policies).

Maximum Sum assured:

PLI (postal life insurance) offers you the maximum sum assured of Rs. 50 lakh. Whereas, LIC of India offers an unlimited maximum sum assured based on the policyholder’s needs.

Premium Payment–

In the case of Lic, we can pay at the branch. The recent update is that Post Office is also offering an online premium payment facility. But I have not checked this. Hence, it is better for you to cross-check at postal officials and proceed.

Tax benefits: Both LIC and PLI qualify for deduction under Sec. 80C.

Considering all these benefits and differentiation between PLI and LIC of India, I feel PLI is still in the olden days. Because it is offering less insurance coverage, entry is restricted to only a few, some service issues, no term insurance available, and age limit. Whereas only two positive points that attract you towards PLI (postal life insurance) are a lesser premium and a higher bonus.

 It is prudent to buy endowment plans from PLI (Postal Life) for you?

Even though PLI offers you a higher rate of return and a lower premium compared to LIC of India and other private insurance companies, the returns, in the long run, may erode drastically if you consider the inflation effect. Along with that, you will be underinsured due to the restricted maximum insurance limit. Post offices are still not customer-friendly. So you may face service issues and claim settlement issues there.

One more important thing: life insurance is not an investment. We should take life insurance as a protection against financial loss, not as a saving.

Why life insurance and investment should not be mixed?. Read this article

Overall, I found PLI (postal life insurance) with limited positive points and unlimited negative points. So, LIC is better than PLI in my view.

Also, read NPS/CPS new tax benefits. Click here to read the article.

Also, read the article Life Insurance Required under need-based analysis. Click here… https://paisahealth.in/how-much-life-insurance-do-i-need-under-human-life-value-telugu-part-2/

Also, read the article about life insurance required under the human life value method. Click here to read it.

Also, read the article about government life insurance APGL. Click here.

Read about: How life insurance agents are making better profits than you?…

Also read: How much life insurance coverage do you need? …

And read Why you should not take one crore term insurance?…

Also read about Why you should not mix life insurance and savings?…

And read about the Bima Jyothi plan from Lic…

Also read about the Lic Bachat Plus Plan.