Paying LIC (Life Insurance Corporation of India) premium regularly can be a daunting task at times, especially for people belonging to lower income group. However, if you are a salaried individual with an EPF account, you can pay your LIC premium from your EPF corpus. Though the facility has been in place for a long time, few people are aware of it.
How to Use EPF Corpus to Pay LIC Premium
An EPF subscriber can instruct the EPFO (Employees’ Provident Fund Organisation) to pay LIC life insurance policy premium from your EPF corpus. You can direct EPFO to pay the LIC premium either at the time of buying the LIC policy or at any time after the initial premium payment has been made by filing Form 14. You can download Form 14 from the EPFO website which acts as an application for financing a life insurance policy from LIC using your contribution to the Employees’ Provident Fund Account. Once your application gets processed, your LIC premium will be automatically deducted from your EPF corpus on or before the due date.
Limitations on Use of EPF Corpus for LIC Premium Payment
There are a few key limitations that you need to keep in mind when availing this facility
- Your EPFO account must be at least 2 years old. In case you have been an EPF member for less than 2 years, then you are not allowed to utilize the facility.
- Your share of total contribution to the EPF corpus at the time of application must be sufficient to pay the LIC premiums of your policy for 2 years
- Your share of annual EPF contribution must exceed the annual premium payment of your LIC policy.
In case of insufficiency of funds in your EPF account, the premium payment will stop automatically. Therefore, it is important that you start paying the life insurance premium by other means, otherwise, your insurance policy may lapse.
Is Paying LIC Premium using EPF Corpus Wise?
It may not be wise to utilize your contribution to EPF corpus to pay your LIC premiums. Firstly, keeping track of both your LIC Premium and your EPF account simultaneously can be quite challenging, especially when your EPF corpus is small because you are a new subscriber. In such a case, your insurance policy may be at risk due to insufficiency of funds in the EPF account.
Further, since the EPF corpus is built to create a long term retirement fund, it is not advisable to deplete the corpus to meet relatively shorter term needs. However, during times of financial hardship or in an emergency, this facility could be a great help to save your insurance policy from lapsing without the need to resort to emergency borrowings. Later, once your financial health gets better, you can always stop availing this facility and keep adding to your EPF retirement corpus.