by A rebate, broadly, refers to a sum of money that is credited or returned to a customer in the context of a transaction. A rebate may offer cashback on the purchase of a consumer good or service, either as a flat-rate rebate, which is automatically subtracted from the purchase price, or conditional rebates, which are only valid under certain conditions, such as “buy one, get one free.” Some conditional rebates require the purchaser to submit a form along with proof of payment to the company offering the cashback.
In life insurance policies, especially in endowment and money back plans; insurance companies provide mode rebate on insurance premium to policy holders. This rebate is not claimed separately; rather it is subtracted from the final premium to be paid.
For example, LIC provides premium payment mode rebate of 2% on yearly & 1% on half yearly, and 0% on Quarterly & monthly premium payment to its policy holders.
This rebate is available on various LIC’s plans like Jeevan Anand, Jeevan Labh, Endowment Plan, Jeevan Lakshya Plans etc.
To put it simply, for premium calculation, insurance companies fix monthly premium for an individual according to his age and policy term for a particular sum assured. Following table indicates monthly premiums of Jeevan Anand policy for 100000 Sum assured.
| Age (In years) | Term 21 Years | Term 25 years | Term 30 year |
| 20 | 451.3 | 369.2 | 298.8 |
| 21 | 452.9 | 370.8 | 300.0 |
| 22 | 455.0 | 372.5 | 301.7 |
| 23 | 456.7 | 374.2 | 302.9 |
Mode rebate is the rebate on premium applied when you select half yearly or yearly premium options over the others. Similarly for high sum assured you enjoy rebates. Both as said earlier reduces premium.
Mode rebate is the rebate given on the premium amount if you pay the premium yearly or half yearly. The logic behind this rebate is to encourage the customer to pay in yearly mode as LIC prints only one receipt in a year and there are less administrative expenses.
