LIC has bull dozed it’s way in the month of March with the launch of a life insurance plan named LIC Jeevan Vriddhi. Needless to say, it will sell like hot cakes because of the fact that it is from LIC which still boasts of a massive army of agents.
With tax planning on everyone’s mind, people will buy this in hordes.
Another reason it will sell is because it has the catchphrase guaranteed attached with it. But does it make sense to even think of LIC Jeevan Vriddhi in your financial planning exercise ? Let’s quickly look at its review, features and then the calculations.
LIC Jeevan Vriddhi Features
This is a single premium plan which offers a guaranteed benefit on maturity. Loyalty additions, in any, are also applicable.
The sum assured is at 5 times the premium chosen by you, so if you want to pay a premium of Rs 10,000, the sum assured is Rs 50,000/-.
To be more explicit, the death benefit will be the sum assured while the maturity benefit will be the guaranteed benefit along with loyalty additions, if any.
Minimum premium amount is Rs 30,000/- which means that the minimum sum assured will be 5 times of this – Rs 1,50,000/-.
Policy term is 10 years and age of person who can take this policy can be between 8 and 50.
Note that the guaranteed maturity benefit (sum assured) will depend on the single premium payable and the age at entry of the life to be assured.
The premium that you pay is eligible for Section 80C deductions. The maturity amount you receive from this plan is tax free as well.
Returns
While you can hop over to the LIC website and check on the other features of this policy, let’s cut to the returns.
Assuming the minimum premium of Rs 30,000/-, let us see what the guaranteed benefits are after 10 years.
GMV stands for Guaranteed Maturity Value.
| Age when taking policy | Premium of Rs 1000/- | GMV for every Rs 1000 premium | GMV for premium paid | Returns |
| 8 | 1,000 | 1,984.60 | 59,538 | 7.09% |
| 9 | 1,000 | 1,982.10 | 59,463 | 7.08% |
| 10 | 1,000 | 1,979.15 | 59,375 | 7.07% |
| 11 | 1,000 | 1,975.55 | 59,267 | 7.05% |
| 12 | 1,000 | 1,972.10 | 59,163 | 7.03% |
| 13 | 1,000 | 1,968.90 | 59,067 | 7.01% |
| 14 | 1,000 | 1,966.35 | 58,991 | 7.00% |
| 15 | 1,000 | 1,964.05 | 58,922 | 6.98% |
| 16 | 1,000 | 1,961.90 | 58,857 | 6.97% |
| 17 | 1,000 | 1,960.00 | 58,800 | 6.96% |
| 18 | 1,000 | 1,958.30 | 58,749 | 6.95% |
| 19 | 1,000 | 1,956.80 | 58,704 | 6.94% |
| 20 | 1,000 | 1,955.50 | 58,665 | 6.94% |
| 21 | 1,000 | 1,954.40 | 58,632 | 6.93% |
| 22 | 1,000 | 1,953.45 | 58,604 | 6.93% |
| 23 | 1,000 | 1,952.65 | 58,580 | 6.92% |
| 24 | 1,000 | 1,951.85 | 58,556 | 6.92% |
| 25 | 1,000 | 1,950.95 | 58,529 | 6.91% |
| 26 | 1,000 | 1,949.90 | 58,497 | 6.91% |
| 27 | 1,000 | 1,948.55 | 58,457 | 6.90% |
| 28 | 1,000 | 1,946.85 | 58,406 | 6.89% |
| 29 | 1,000 | 1,944.55 | 58,337 | 6.88% |
| 30 | 1,000 | 1,941.60 | 58,248 | 6.86% |
| 31 | 1,000 | 1,937.70 | 58,131 | 6.84% |
| 32 | 1,000 | 1,932.80 | 57,984 | 6.81% |
| 33 | 1,000 | 1,927.00 | 57,810 | 6.78% |
| 34 | 1,000 | 1,920.40 | 57,612 | 6.74% |
| 35 | 1,000 | 1,912.85 | 57,386 | 6.70% |
| 36 | 1,000 | 1,904.30 | 57,129 | 6.65% |
| 37 | 1,000 | 1,894.60 | 56,838 | 6.60% |
| 38 | 1,000 | 1,883.65 | 56,510 | 6.54% |
| 39 | 1,000 | 1,871.20 | 56,136 | 6.47% |
| 40 | 1,000 | 1,857.10 | 55,713 | 6.39% |
| 41 | 1,000 | 1,841.45 | 55,244 | 6.30% |
| 42 | 1,000 | 1,823.95 | 54,719 | 6.19% |
| 43 | 1,000 | 1,803.90 | 54,117 | 6.08% |
| 44 | 1,000 | 1,781.05 | 53,432 | 5.94% |
| 45 | 1,000 | 1,755.30 | 52,659 | 5.79% |
| 46 | 1,000 | 1,726.55 | 51,797 | 5.61% |
| 47 | 1,000 | 1,694.75 | 50,843 | 5.42% |
| 48 | 1,000 | 1,659.95 | 49,799 | 5.20% |
| 49 | 1,000 | 1,622.60 | 48,678 | 4.96% |
| 50 | 1,000 | 1,582.25 | 47,468 | 4.70% |
Note – Service tax has not been considered.
The returns are nothing to cheer about. This is what all the endowment polices will offer you.
Do the returns become any better with loyalty additions ? Yeah they should but not by a huge margin.
Look at the illustration of this policy at the LIC website. If you consider the loyalty additions there, then the returns are as follows :
| Age at entry | Premium | GMV | Loyalty | Returns without bonus | Returns with bonus |
| 20 years | 30,000 | 58,665 | 7,333 | 6.94% | 8.20% |
| 35 years | 100,000 | 197,023 | 24,628 | 6.70% | 8.28% |
Should you invest?
There are loads of other products out there which will return you more than this. Don’t buy it simply because you need to do tax planning at the last moment or because returns are guaranteed.
Just avoid. Even if your dad’s best friend wants to do your tax planning this year and even if you are caught in the “investment is insurance” rut – just avoid LIC Jeevan Vriddhi !
@Radhey,
Excellent analysis. Looks like there are some good marketing/sales guys in LIC. Every year during Jan-March they come up with such policies and investors fall prey to it. It’s a shame people do not do any research before buying these products.
If it was four years ago I might have brought this product.
@Rakesh, Many people don’t have the capability to do research as well.
They are sitting targets to life insurance advisors.
@Rakesh, even the company knows that the people of india are not fool, that they will invest without any investigation… Their is some silent feature in this policy, which is really going to benifit for certain catagory of customer. So i will request you to go through the policy detail, whether you buy or not. Financial Advisor ( Rajesh sur )
@Rajesh sur, Sorry but can you be more explicit what that is. Have we all missed something ?
@Rajesh,
I didn’t get you either. Can you please be more elaborate? Do you have anything new to share?
@Rajesh sur, If our discussion is going in wrong direction I request you to put us on right track. Kindly let us know what salient features this policy has and how it will benefit which category of customers?
A statement without any data is not going to help.
Not only this policy is selling like hot cakes, the reviews are also heating up. This is the 3rd online review I am reading about this policy but the conclusion is same everywhere.
I have seen lot of LIC fans criticising such reviews stating 8% tax free guranteed returns [they don’t consider bonus as not guranteed] is one of the best. The LIC fans claim that other instruments with higher returns [post tax] are totally dependent on the share market, which is highly volatile at the moment. But do they know at the end of the day where LIC is investing their money? It is the same share market where they will earn 15% and give 6-8% to their “fans”.
Well the advertising notes about this policy looks awesome. Anyone will take this policy knowing about the 5 times of premium. But you gave good analysis, anyways, selling of this policy doesn’t look to slow down.
@Financial Planner Certification, It will not slow down due to two important factors: –
1) The timing of the launch of this product. People don’t have much time left to do proper analysis and consider all the pros and cons.
2) The advertising and marketing of the product. LIC has mastered this skill anyways.
@Vivek,
I have to agree with you on this. This afternoon when i had been to lunch in my office canteen i saw LIC agents explaining this and Jeevan Ankur products to the employees and i am sure many would have bought them.
@Rakesh, Jeevan Ankur? O man! that’s one of the worst products in terms of returns, it hardly returns 2%. If people were to fall prey to LIC I hope they don’t fall for Jeevan Ankur at least.
@Radhey, have you ever come across any LIC policy that you would be happy to recommend? I am keen to know have they ever launched a worthy product?
@Vivek K, It would be unfair to say LIC doe snot have good products. The definition of good is different to different people.
I do not know of all products from LIC in and out so I cannot say whether there are good or bad.
I have checked their term plans and I can say, it is pretty expensive.
@Radhey Sharma, Agree that what is good to you might not be good to me. But from a financial planner perspective is there any product you would recommend? Again I acknowledge the fact you may not be aware of all the products.
The reason I ask this question is because LIC is such a renowned company and I haven’t seen a single CFP recommending their products. The two experts [LIC and CFPs) in their own areas don’t seem to go along with each other. 🙂
May be time to do an article “Best LIC products to buy in 2012” 😉
@Vivek K, Nopes, I haven’t come across even one till now.
@Radhey Sharma, Pretty strange huh? A company in business for decades and not even a single product to beat the inflation or suit basic financial planning guidelines. Hope people see LIC products from the right perspective.
@Vivek K, To beat inflation they have ULIPs, but then CFPs don’t advise you take them.
“suit basic financial planning guideline” – again, their products can be tailored to financial goals but might no match up to the guidelines as you rightly say !
@Radhey,
Yes, their term plans are expensive, it’s almost twice the premiums of private online plans. But if you honestly fill the documents and if you pay the premiums for two years the claim will never be rejected. This was told to me by my agent.
So atleast i can be assured if private players reject my claims for whatever reasons, LIC won’t
@Rakesh, This is told by agents of all insurance companies not just LIC. Even LIC can reject your claims based on the similar grounds as private players and IRDA will treat the complaints equally. I don’t see any reason to be assured about LIC.
@Rakesh, I don’t quite agree here, if you do the same thing with private players, even they wont reject !
@Radhey,
Had a question, for eg. if i had a policy with LIC and a private player and if LIC settles my claim, will the private player settle it promptly or they would take their own sweet time to investigate/delay/with-hold the claim.
@Rakesh, They might take their own sweet time as they want to do their own investigations.
But settlement by one can make a case that nothing is awry and can act as a catalyst.
@Rakesh, Are you 100% sure that LIC will not take its own sweet time to settle the claim?
@Radhey,
Thanks for your comments
“But settlement by one can make a case that nothing is awry and can act as a catalyst.”
It gives me me hope. My current term plan with LIC is over 5 years and i had given all the correct information, so i am sure if any claims arise it will be cleared. I was only worried about the private players.
@Radhey Sharma,
Gentleman, You just go through the statistics published by IRDA. While the claim rejections by private players range from 10- 40%, LIC has settled more than 99% claims last year.
Everyone knows the fate of Private companies like AIG etc. who have looted public money and became bankrupt in USA. Can we still believe these guys anymore?
@John,
I have to agree with you, i had read about AIG, many private players could follow suit too.
@John Mathew, John, have you ever wondered why LIC has high claim ratios? It might give a perception that LIC is an institution that cares about general public and would seldom reject a claim. However, don’t forget that they are here to do business and not charity.
LIC is famous for selling investment cum insurance policies [which is fundamentally wrong] where premiums are pretty high. The average policy value would probably be around 5 lacs or in few cases reaching 10 lacs. The money they collect from customers is invested partially in government securities and rest in market. The return of investment for LIC is probably around 15-20% or may be more, out of which they pass on 6-8% to the customers. Now a company earning over 10% profit in every investment would have no problem whatsoever in approving the claims. Also, the policy value is so small that it not even making a minor dent in their business.
Moreover, the institution is very old and most of the policies are maturing for claims, where LIC have already made their profit margins. So, why would they bother rejecting the claims?
The private players are relatively new in the market and are focusing on low premium and high return products to compete with LIC. Now if claim comes within first few years of issuing policy for high sum assured, obviously there will be more scrutiny and rejections could be high. LIC would do the same for their high sum assured term insurance plans.
If you really want to compare the claim settlement ratio, I request you to compare the claim settlement ratio of pure term insurance plans of all the companies. This will give you a true picture of who stands where.
@Vivek K, Great stuff Vivek, way to go man. Amazing!
@Rakesh, So Rakesh, are you telling me that you would go with LIC policies too?
@John Mathew, John, read here – https://www.thewealthwisher.com/2011/10/10/life-insurance-death-claim/
@Rakesh, Bakraas at their disposal !!
@Vivek,
I am not sure about the time for settlement on claims from LIC. I will share an incident that happened few years ago. A person who lived in my neighborhood expired overseas and LIC settled all his claims within three months. He got about 50 Lakhs from his policies, not sure what kind of policies he had held. But I can say he was an MD in an organization so that could have helped to settle the claims faster.
Such incidents give me hope that LIC will at least settle my claims and my family will not have to struggle more.
@Rakesh, If the person had influence due to his post then that doesn’t count.
I am still trying to understand as to why people think LIC will process their claims and private players won’t?
@Vivek,
Not sure about influence but it could be the Admin guys could have played a role in settlement of claims.
@Vivek,
Yes i would go with LIC Term plans only, I have one for more than five years and i am confident if any claim arises it would be passed. Moreover once they come up with their online term plans i’ll buy that too even though the rates are 10-20% higher than private players.
@Rakesh, Good to hear when you said Term plans. As long as people are not buying investment cum insurance products it is fine. Term plans from LIC or Non-LIC, doesn’t make a difference in my eyes.
@Vivek,
Only their term plans are good, i did have endowment and pension plan which i made it paid up. The only reason i am biased towards them is they for over 100 years and given their track record the chances of rejection is less if we disclose all information honestly.
I am not against private players they need to gain public confidence.
@Rakesh, You have taken a wise decision. Hope public realise it soon and give up such products and focus on term plans only.
@Vivek,
Credit goes to Radhey and other financial bloggers who i have been following for the last few years.
@Vivek K, This would definitely make Radhey and other bloggers proud. After all financial awareness is one of their motto.
@Vivek K, LIC benefits by the huge agent base it has – it is simply HUGE !!!
I have heard they have stalled the online term plan of LIC.
@Radhey Sharma, They might have and they are very much capable of doing it. But I read in an interview of some LIC folk that product will be launched in March end. Let’s wait n watch!
@Vivek,
Yes, credit should be given where its due. Like me, many other reader have been benefited and which have helped to put their financial plan back on track.
@Vivek,
I think people will fall prey to Jeevan Ankur as its for children and people are more emotionally attached to children and want the best for them. It is easy to brain-wash them in the name of the child and his future.
As for any LIC policy that could be recommended is their offline term plans, even though the premium is higher the chances of rejection in future would be remote.
@Rakesh, Emotional athyachar, anyone ?
@Radhey Sharma, As a matter of fact I went through a bit of an emotional atyachar. My dad recommended me to buy Jeevan Ankur for my son but then I explained him the details and he simply said I know, you can’t expect more returns from LIC but at least your money is safe and you get back what you paid as premium.
So, yea some people don’t care about inflation, they are happy with their original investment coming back. It’s like I am paying you 10k to give me 1lakh coverage and after 10 years I get my 10k back or may be 11k. It’s good enough for many people.
@Vivek K, Yeah. LIC has created such an impression on people’s mind that it is simply impossible to impress upon them the good and the bad – for them LIC is everything.
But it is opportunities like these that one needs to wrench and convince people about the right things in personal finance. Quite a challenge but worth a try.
@Radhey,
I agree with you, LIC has created a huge impression on the people. If you see our previous generations, i guess almost everyone would have had an LIC policy. It’s only because of you and other financial bloggers who have keep advising us on the pros/cons of these policies we have been able to make a judgement.
@Radhey Sharma, Agree. Somehow people are very much attached to LIC’s any product. Also most of the people (my experience) believe that they will surely settle the claim for any product (why? – Vivek has explained this nicely).
I know, in my office, many many (almost all) has taken endowment / sum assured products from LIC. I did give a try to educate two of my colleagues, they had the same clarification it’s LIC, returns are fixed other products depends on equities and you will lose all your money. Though I explained them little about investment duration, returns and other things, the time was not enough for me to convince them 100% and we postponed the discussion…….. LOL…… But they got some intrest and wanted to discuss this in detail.
Both of them are investing lots of money annually in LIC. I told them continue the existing stuff though research before you add any new product from LIC. They were surprised to know that I don’t have any single product from LIC, they had only one question where else do you invest ????
There are many who don’t have time/intrest to research on what they are investing. The only research they have inherited is, they feel LIC is loyal and returns are guranteed, why to waste time on researching other products.
@Chirag, Excellent Chirag! You must continue to educate people about such investments. Hope you illustrated them how LIC products can never beat the inflation.
If they are interested in discussions you can always ask them to follow finance blogs including wealthwisher. 🙂
@Vivek K, Thanks Radhey, I explained them related to inflation though they were too new to think about that and they didn’t mind inflation (LOL), slowly they will get to know when we may again get into discussion. As we always discuss work and technology in office, in the months of Jan-Mar only this kind of discussion happens and after Mar people forget it (too quick).
I also informed them to read blogs online including wealthwisher, but they just noded their head (little lazy / less intrest to read about finance). I am sure they don’t remember the 2-3 websites names I suggested. If I get enough time with them, I will make them interested. Money can catch everyone :).
@Chirag, Good one Chirag!
However, I don’t think people are lazy. I think they have a perception that the blogs are full of finance jargon, which they will not understand so why waste time when they can get free advise from finance department in office or the tax consultants visiting office or policy agents.
Once they understand the importance of beating inflation, they will automatically come in search of good products. You may try doing one thing, which I tried on my colleagues and it worked big time. I asked them to fill the retirement calculator and when they saw the total corpus required they just went bonkers. They thought they are in IT and earning good money so their retirement is safe and no planning is required but the perception changed soon after that. Try it and let us know how it went. 😉
@Vivek K, Very true Vivek they are not so lazy but lazy about reading finance. I am going to give your idea a try once I get their time, I thought the same yaar !!!!(about to start with their retirement when we discuss next time.) Thanks for your calculator idea, it would be great. Really good catch man.
@Chirag,
Good to hear that you are educating you colleagues.
If they can spend 2-3 hours daily on facebook, then they can spend 15 mins daily on wealthwisher too.
@Rakesh, Ya Rakesh you are right. If they cut their intrest in FB and put little on here. I thought not to force them in very first discussion otherwise they will understand me an agent LOL ! Let them be convinced with little time.
@Chirag, You are very right Chirag, patience is the virtue!
@Radhey,
Guess what the response to Jeevan Vriddhi was overwhelming in my office and they will be back tomorrow. More bakraas.
@Vivek,
Yes, it’s difficult to convince elders. I had taken LIC money back policy in late 90’s at that time i had to pay 7k premium for 20 years and i would get 2 lakhs at the end of the term. 2 lakhs sounded a big figure.
@Rakesh, We all have been victim to such policies.
@Radhey,
Just forgot to mention, LIC agents were successful in selling over 100 policies during their camp. But at least i can say that i could convince two of my colleagues not to buy these policies.
Very good discussion and analysis about LIC’s influence on people. Thanks!
I feel that it has been due to agents, their salesmanship coupled with greed for commissions, lack of financial awareness and LIC’s monopoly. It was justified only to some extent as it helped some insurance percolation in India at initial stage. But not any more.
It will take some time for people to be aware about the basics of insurance like required cover. And the game has begun. IRDA has raised the standard of agents’ exams, the commissions has also been rationalised on ULIPs, et cetera.
@Sukhvinder,
Thanks for sharing your views, it may take another few years till everything is streamlined but at least we are moving in the positive direction.
@Sukhvinder Sidhu, It’s a beginning Sukhwinder. Like you and I got awareness and education others will join the club soon. We should take responsibility too to spread the awareness and soon financial products will sold on their merit and not salesmanship.
My LIC agent came home today and showed me a brochure for this plan. He had a print-out in which it was mentioned guaranteed 12% returns, I don’t know how they came to that figure. Are they allowed to manipulate the returns on paper? He also said that he sold over 50 policies and its very attractive being single premium.
As he is very senior i just told him i will think about it and get back to him. Did not want to argue too much.
@Rakesh, You should have asked him about the details on guranteed 12% returns. At least we would know how they are manipulating it.
@Vivek,
I did ask him and told him that i had read about 8% returns in the news papers. He said this is the revised rate of returns, though it was not on LIC letter-head, it was just a pamphlet.
He is in his late 50’s so i did not argue much.
hi,
Good analysis.
If you want to get yourself insured, go for an term plan. Which will cost 1/10th of the normal endowment plan. If you know how to operate computer and net..you can cut the cost more, by opting for an term plan online… rest of the money can be insured in other products like mutual funds,ETF’s,gold etf etc…
here is an sample…
Age 26, yearly premium – 26k, sum insured 5L, yrs -21…LIC Jeeven Anand- at the end of the policy term, i would get around 7-8L.
if you opt for term plan…
Age 26, yrly premium – 5k,sum insured 50L, yrs-30…Aviva i-termplans… if i invest the remaining 21k for 30yrs at the rate 15% i would be millionaire….
@Prasanna, Absolutely right Prasanna, I hope many people think the way you do.
All of us here keep on discussing about term plans + MF investments to achieve long term goals.
@Prasanna,
Good example, its simple and easy but people don’t understand and end up buying endowment/money-back/pension plans. I followed the example and am reaping the benefits since last 5 years. Hope many follow suit.