LIC Premium Components
Your LIC premium is calculated based on several factors:
- Tabular Premium — Base rate per ₹1,000 of Sum Assured, determined by your age and policy term. Younger age = lower premium.
- Sum Assured Rebate — Discount for higher SA. Typically ₹1.50 per ₹1,000 SA for ₹2-5 Lakhs, ₹2.00 for ₹5 Lakhs+.
- Mode Factor — Paying non-yearly costs slightly more. Half-yearly: ×0.5131, Quarterly: ×0.2577, Monthly: ×0.0866.
- GST — First year: 4.5% of premium. Renewal years: 2.25% of premium.
- Riders (Optional) — AD&DB rider adds approximately ₹1 per ₹1,000 SA to the base premium.
Premium Formula
The simplified formula is:
Premium = (Tabular Rate × SA / 1000) − SA Rebate + Rider Premium + GST
Factors That Affect LIC Premium
- Age at Entry — Younger policyholder = lower premium. A 25-year-old pays less than a 35-year-old for the same plan.
- Policy Term — Longer terms generally have lower annual premiums but higher total outgo.
- Sum Assured — Higher SA = proportionally higher premium, but you get rebates above ₹2 Lakhs.
- Plan Type — Money back plans cost more than endowment plans. Single premium plans require a large one-time payment.
- Payment Mode — Yearly is cheapest overall. Monthly costs ~4% more annually due to mode loading.
LIC Premium Payment Modes
LIC offers 4 payment modes for your convenience:
- Yearly — Most economical. Pay once per year.
- Half-Yearly — Pay twice a year. Slightly higher total cost (~2.6% loading).
- Quarterly — Pay four times a year. (~3.1% loading).
- Monthly (ECS/NACH) — Pay every month via auto-debit. (~3.9% loading).
Tax Benefits on LIC Premium
LIC premiums qualify for tax deductions under the Income Tax Act:
- Section 80C — Deduction up to ₹1,50,000 per year on life insurance premiums (subject to conditions).
- Section 10(10D) — Maturity proceeds are tax-free if annual premium does not exceed 10% of Sum Assured.
Note: Tax benefits are subject to applicable tax laws. Consult a tax advisor for your specific case.