Do you hold the classic LIC Table 2 (Whole Life) policy? If yes, consider yourself fortunate. In today's financial landscape, securing a "Whole Life" cover at the incredibly low premium rates of the past is virtually impossible. This policy is not just an insurance document; it is a financial heirloom. While many policyholders are tempted to surrender it due to the long premium payment term, doing so could be a mathematical mistake.
Welcome to Jeevan Bima Bazaar (JBB), your trusted guide to maximizing the value of your legacy assets. In this detailed analysis, we will uncover why Table 2 is a hidden "Gold Mine," explain the little-known "Age 80 Cash-out" clause, and guide you on how to manage this policy in .
Why is LIC Table 2 Special? (Small Investment, Big Legacy)
The Whole Life Plan (Table No. 2) is designed with a singular philosophy: Financial protection against death throughout the lifetime of the Life Assured. Unlike modern Endowment plans that mature after 15 or 20 years, leaving you uninsured in your old age, Table 2 promises to stay with you until the very end.
JBB Analysis of the "Low Premium" Advantage:
The most striking feature of this plan is its cost structure. Because the risk is spread over a lifetime, the annual premiums are significantly lower compared to other plans.
- The Asset Class: This is a "With-Profit" plan.
- The Benefit: It participates in the profits of the Corporation's life insurance business, receiving a share in the form of Simple Reversionary Bonuses declared annually.
- The Guarantee: Once these bonuses are declared, they form part of the guaranteed benefits of the plan.
For existing holders, this means your accumulated bonuses over the decades likely exceed your Sum Assured, creating a substantial tax-free corpus.
The Truth About Premium Payment (35 Years or Age 80?)
A common confusion among Table 2 policyholders is the duration of premium payments. Many believe they have to pay "forever," which leads to frustration and lapses. Let’s clarify the official rule.
The Payment Rule: Premiums are not payable for life. According to the policy terms, premiums are payable for a period of 35 years OR up to age 80 years, whichever is later.
💡 JBB Insight:
This implies a "Limited Payment" structure in practice. If you bought the policy at age 30, you don't pay until death. You pay until the defined term ends. This is a marathon, not a sprint. Stopping premiums midway destroys the compounding effect of the bonuses just when they are about to grow the fastest.
Can You Get Money in Old Age? (The Age 80 Cash-Out Rule)
Technically, a Whole Life policy does not have a maturity date. It is designed to pay the claim to your nominee upon death. However, Jeevan Bima Bazaar highlights a crucial "Exit Clause" that acts as a shadow maturity benefit.
The 40/80 Rule: You have the option to take the Sum Assured plus all bonuses declared under the policy if you meet two specific conditions:
- The policy has run for at least 40 years from the date of commencement.
- You have attained at least 80 years of age.
What This Means for You:
If you live a long, healthy life, you are not forced to leave the money only for your heirs. At age 80, you can choose to "Cash Out" the entire corpus to fund your medical needs, retirement comfort, or to gift it to your grandchildren while you are still alive. This flexibility makes Table 2 a unique hybrid of protection and pension.
How is the Death Benefit Calculated?
The primary purpose of Table 2 is family protection. In the unfortunate event of the life assured's death, the payout is substantial.
The Payout Structure:
The Death Benefit payable in a lump sum includes:
- The Basic Sum Assured; PLUS
- All Vested Bonuses accrued to date; PLUS
- Final (Additional) Bonus (if the policy has run for a certain minimum period).
This structure ensures that the insurance cover grows every year. Even if the Sum Assured was small (e.g., ₹50,000) when bought in the 1990s, the accumulated bonuses significantly inflate the final claim amount in .
Why Surrendering is a Mathematical Loss
If you are thinking, "The premium term is too long, I should close it," please read this carefully. Surrendering a vintage Table 2 policy is often a financial loss.
The Surrender Formula:
- Eligibility: You can surrender only after the policy has been in force for 3 years or more.
- Guaranteed Surrender Value (GSV): The GSV is strictly 30% of the basic premiums paid, excluding the first year's premium.
JBB Warning:
The Corporation may pay a Special Surrender Value, but it reflects the discounted value of the reduced claim. By surrendering, you lose:
- The protection cover that is incredibly cheap by today’s standards.
- The future bonuses that would have compounded on the full Sum Assured.
- The Final Additional Bonus (FAB), which is paid only on maturity/death, not usually on early surrender.
Illustration: Returns on a Policy
Let’s look at the official numbers to understand the ROI (Return on Investment).
Case Study Parameters:
- Age at Entry: 35 Years
- Sum Assured:
- Premium Paying Term: 45 Years (up to age 80)
- Annual Premium:
Projected Value at Age 80 (End of 45 Years):
| Scenario | Total Premiums Paid | Guaranteed Benefit | Total Benefit (Projected) |
|---|---|---|---|
| Scenario 1 (6%) | |||
| Scenario 2 (10%) |
JBB Verdict:
You pay roughly over a lifetime. In return, at age 80, the projected value is between and . This represents a multiple of 2.5x to 5.7x on your investment, plus the peace of mind of life cover for 45+ years.
This is the original sales brochure issued by LIC for Table 2. It serves as the official proof for the 'Age 80' withdrawal clause and the premium payment terms.
Key Verifications Inside:
- Premium Term: Payable for 35 years or up to Age 80.
- Cash-out Rule: The option to withdraw Sum Assured + Bonus after 40 years/Age 80.
- Surrender Value: The 30% calculation rule.
Table 2 vs. Modern Term Insurance: Which Wins?
Many advisors suggest surrendering old policies to buy Term Insurance. While valid for young people, this is often bad advice for existing Table 2 holders. Here is why:
| Feature | LIC Table 2 (Vintage Asset) | New Term Insurance (Bought at Age 50+) |
|---|---|---|
| Premium Cost | Extremely Low (Locked at entry age 20/30) | Very High (Based on current age 50+) |
| Coverage Duration | Whole Life (Age 100) | Expires at Age 70/75 |
| Cash Value | Yes (Paid at Death or Age 80) | Zero (Pure expense) |
| Bonus Accrual | Yes (Compounding annually) | No |
| Lapse Risk | Low (Can convert to Paid-up) | High (Policy ends if premium stops) |
What if You Stop Paying Premiums? (Paid-up Value)
If you are unable to continue the premiums, do not surrender. Let the policy become "Paid-up."
- Condition: If premiums have been paid for at least 3 years, the policy does not lapse completely.
- Effect: The Sum Assured is reduced proportionately.
- Bonus: The bonuses attached to the policy before the date of default remain attached.
- Benefit: The reduced Sum Assured + Vested Bonuses will still be payable at death or at age 80. This preserves your past investment without requiring future payments.
FAQ: Frequently Asked Questions
Yes. Since the policy acquires a surrender value after 3 years, you can avail of a loan against it. This is a better option than surrendering if you need emergency funds.
No, it is an option. If you do not exercise this option, the policy continues, and the death benefit (which will likely be higher due to added bonuses) will be paid to your nominee upon your demise.
The Sum Assured and the Bonuses once declared are guaranteed. Future bonuses depend on the Corporation's profits and are not guaranteed.
You get nothing. A Surrender Value is available only after the policy has been in force for 3 years or more.
No. The premium is fixed at the start of the policy and remains the same throughout the premium paying term.
Conclusion:
LIC Table 2 is a "Financial Heirloom." Its low premium structure combined with the option to cash out at age 80 makes it a unique asset that cannot be replicated in today's market. Instead of surrendering, consider making it "Paid-up" or holding it to maturity to reap the full benefits of compounding. Stay tuned to Jeevan Bima Bazaar for unbiased financial insights.
Next: Access the Master List of all LIC Discontinued Plans.
