Basic sum assured, sum assured on death, policy term, premium paying term and entry age, explained in plain words with LIC examples.
When you read an LIC policy document or a benefit illustration, a few words come up again and again. Once you understand them, the rest of the policy becomes much easier to follow. This guide explains them one by one.
Basic Sum Assured
The Basic Sum Assured is the base amount of cover you choose when you buy the policy, for example ₹5 lakh. Most other numbers in the policy, such as bonuses and paid-up values, are worked out from it. Each plan has a minimum. In LIC's New Jeevan Anand (715) and LIC's Jeevan Labh (736), for example, the minimum Basic Sum Assured is ₹2,00,000.
Sum Assured on Death
This is the amount used to work out the death benefit. It is often not the same as the Basic Sum Assured. Many current LIC plans define it as "the higher of" two or more amounts. For example:
- In plan 715, it is the higher of 125% of Basic Sum Assured or 7 times the annualised premium.
- In plan 736, it is the higher of Basic Sum Assured or 7 times the annualised premium.
In both plans, the death benefit also cannot be less than 105% of the total premiums paid up to the date of death. The exact definition changes from plan to plan, so always check the brochure of your plan.
Sum Assured on Maturity
This is the guaranteed part of what you receive if you survive to the end of the policy term. In plan 715 it equals the Basic Sum Assured. In money back plans it can be a smaller share, because part of the cover has already been paid to you as survival benefits along the way. Bonuses, if any, are added on top. See LIC bonus explained.
Policy term vs premium paying term
| Term | What it means |
|---|---|
| Policy term | How long the policy runs and covers you |
| Premium paying term | How many years you pay premiums |
These two can be the same or different:
- Regular premium: you pay throughout the policy term. Plan 715 works this way.
- Limited premium: you pay for fewer years than the policy runs. Plan 736 offers combinations such as a 16-year term with 10 years of premiums.
- Single premium: you pay once at the start. LIC's Amritbaal (774) offers a single premium option alongside limited premium.
Premium modes
You can usually pay yearly, half-yearly, quarterly or monthly. In plan 715, monthly premiums are collected through NACH (auto-debit from your bank) or salary deduction. The mode affects how much you pay in total over a year, which brings us to rebates.
Rebates: mode and high sum assured
- Mode rebate: many plans give a small discount for paying yearly or half-yearly, because it saves the insurer collection effort. In plan 715, quarterly and monthly modes get no mode rebate.
- High Sum Assured rebate: if you choose a larger Basic Sum Assured, the premium per ₹1,000 of cover often reduces a little. The slabs differ by plan.
Entry age: nearer, last or completed birthday
Brochures state age in three different ways, and the difference matters near your birthday:
- Age nearer birthday: your age rounded to the nearest birthday. If you are 35 years and 7 months, you count as 36.
- Age last birthday: your age as of your most recent birthday. 35 years and 7 months counts as 35.
- Completed age: the full years you have actually completed, which in practice works like age last birthday.
Plan 715 uses "completed" for minimum entry age (18 years) and "nearer birthday" for maximum entry age. Plan 774 uses "last birthday" for its age limits.
A simple example (illustration only)
Suppose Ramesh, aged 30, buys a limited premium endowment plan with a Basic Sum Assured of ₹10 lakh, a policy term of 21 years and a premium paying term of 15 years.
- He pays premiums for 15 years, then stops.
- His cover continues for the full 21 years.
- If he dies during the term, his nominee gets the Sum Assured on Death as defined in the plan, plus any bonuses added.
- If he survives, he gets the Sum Assured on Maturity plus any bonuses added.
Quick tips
- Choose a premium paying term that ends before your income may fall, for example before retirement.
- Check whether your age is counted as "nearer" or "last" birthday before you apply.
- Look up any unfamiliar word in our insurance glossary.
Want to see how sum assured and term change your premium? Try our premium calculator.