Many of us holding LIC policies. However, only few know that we can pay LIC Premium Payment using EPF corpus also. Let us see this feature of EPF in detail.
Paying LIC Premium Payment using EPF corpus is the feature which exists with EPFO since long. However, only few are aware of it or using it. It is an automated process where you have to just inform EPFO.
Features of paying LIC Premium Payment using EPF corpus
Let us see the features of this facility.
# You can instruct EPFO while buying the Insurance Plan
It is not mandatory that you must already holding LIC policy. You can instruct EPFO at the initial stage itself (while buying LIC policy) that to pay the LIC Premium Payment using EPF corpus.
# You can instruct EPFO to pay for your existing LIC policies
If you already an LIC policy holder, then you can instruct EPFO to pay the premium against your existing LIC policies.
# Policy turn Paid Up if there are no sufficient funds
If the funds insufficient to pay the LIC premium by EPFO corpus, then EPFO will stop paying the premium. It is then your responsibility to take care of your LIC policies. If you also not pay, then the policy will be lapsed and considered as paid up.
# Facility will be active as long as there is enough fund in your EPF
EPF will pay LIC Premium Payment using EPF corpus as long as there is a fund available. Once there is shortage of fund, then it is employee or LIC policy holder’s responsibility to pay his dues against LIC policy.
# You have to assign the policy to Central Board of Trustees, EPFO
I am not sure why they set this rule of assigning the policy to EPFO. You can check the same with EPFO or your employer for clarity. But this is the rule as appears on the form. Hence, you have to follow it.
# Your EPF account must be at least 2 years older
To avail this facility, you must be member of EPF at least 2 years. Otherwise, you are not allowed to utilize this facility.
# You have to submit the form to your employer
You have to DOWNLOAD the EPFO Form 14, fill it and submit the same to your employer.
Is it wise to pay LIC Premium Payment using EPF corpus?
In my view, there is no online set up to track the premium paid by EPFO to LIC. Hence, it is hard for an individual to track. Also, if there is any delay in premium payment by EPFO, it will directly affect your insurance holding.
The delay may be due to procedural, but the onus of late payment and losing the insurance cover may be the biggest risk which you have to face.
Hence, if you are capable of tracking the premium payment by EPFO and ready to take the risk of policy turning to be a lapse or paid up, then you can use this facility.
As I said above, EPFO stops paying the premium once there is a shortage of funds in your EPF account. Hence, the biggest risk in this set up is for an employee to track the availability of corpus. This risk is higher to the new member of EPF as their corpus is not high.
Also, EPF is the product which is meant for your retirement corpus creation. Hence, utilizing this for paying LIC Premium is not a wise decision.
However, there is a short financial hurdle, then you can utilize this facility to pay LIC Premium Payment using EPF corpus. Once, you financial health increases, then in my view stop availing this facility.