LIC is launching one more Single Premium plan on 21st May 2012. Looks like all insurers on launching spree of single premium plans. Now let us look at it’s features and what is new in it. It is a single premium plan and closed ended plan. It will be available for 120 days from May 21st 2012. It is non-linked insurance plan (non ULIP).
1) Minimum Age-8 Years
2) Maximum Age-65 Years
3) Mode of Payment-Single Payment
4) Minimum Sum Assured-Rs.2,00,000 and Maximum no limit
5) Minimum Premium-As being Minimum SA is Rs.2,00,00 so Minimum Premium Payment will change for each age group (for example for 8 years old Single Premium will be Rs.95,210 excluding taxes and for 65 years old Single Premium will be Rs.1,06,280 excluding taxes)
6) Policy Term-10 Yrs
Benefits:-1) Death Benefits
On death during the policy year excluding the policy year i,e 10 year you will receive Sum Assured.
On death during the policy 10 year, you are eligible for Sum Assured along with Loyalty Addition.
2) Maturity Benefit
On Maturity Sum Assured along with Loyalty Addition will be payable.
3) Loyalty Addition
It depends on LIC’s experience which you cant expect now exactly.
Loans-Loan can be granted after the one policy year subject to the maximum of Surrender Value (remember not the premium you paid). Loan interest rate is 10.25% Compounding Half Yearly.
Surrender Value- 1) Guaranteed Surrender Value- You are eligible for 90% of the premium you paid after the expiry of one year but excluding extra premium if you paid any.
2) Special surrender value will be payable, if it is more favorable to the policyholder.The Special Surrender Value will be the discounted value of the Sum Assured. The discount factors shall be the special surrender value factors used for LIC’s Endowment Assurance plan, which will depend on the policy term and the duration elapsed since commencement of the policy. The Special Surrender Value factors per Rs. 100 Basic Sum Assured for duration 1 and 1.5 years are 44.52 and 45.97 respectively
My Review:- In plain it looks like previous single premium plan of LIC’s Jeevan Vriddhi. But in reality you may find lot of differences.
1) Maturity benefits and Death Benefits- In Jeevan Vriddhi Maturity Sum Assured was guaranteed but here it depends on LIC’s Loyalty Addition declaration which you cant predict. Death Benefit too looks not attractive, usually in non linked plans you will get Sum Assured along with Bonus till the date of the death. But in this plan only Sum Assured will be payable if death occurs within 9 years of policy term as only Loyalty Addition is attached with this policy. Instead if death occurs during 10th year then you are eligible for Sum Assured along with Loyalty Addition. So big drawback of this policy is death benefit you will get before 9th year of policy.
2) Returns-Let us consider Insured age as 30 yrs and for this age tabular premium will be Rs.463.417 for Rs.1,000 Sum Assured (Excluding applicable taxes). So if he opts for Rs.10,00,000 Sum Assured Plan then he need to pay a single premium of Rs.4,63,417. In this case your life risk will be Rs.10,00,000 and returns on death claim too same till the 9th year of policy. Now in this we will exclude the premium which you will be paying towards your life risk coverage of Rs.10,00,000. For that as usual I consider LIC’s Term Plan Anmol Jeevan for 10 yr period. So premium for this term insurance is Rs.2,564 yearly. Now after deducting this amount from the single premium you are paying Rs.4,46,213 (For this I considered whole 10 year term plan payment being invested now in a 8% returning avenue then today you need to invest Rs.17,204 to accommodate yearly flow of Rs.2,504 towards Term Insurance) . So for the whole 10 year your investment amount will be Rs.4,46,213. To generate returns of around 9% from this policy then Loyalty Addition LIC need to pay will be Rs.56,348 along with SA (Future Value with 9% CAGR is Rs.10,56,348). Will LIC deliver such a high Loyalty Addition after paying 2% agents commission and it’s policy expenses? Few may refer it as a Insurance+Investment Plan. But as the term of the plan being 10 years, will LIC issue same Sum Assured Term Insurance after 10 years without increase of Premium to the person who invest now in this plan? A big no, then forget about Insurance part attached with this plan and just purely think as how much you will get by investing.
3) Loyalty Addition-This is the major point you need to look for. Because your returns depend on this Loyalty Addition. Now let us look at the LIC’s history of Loyalty Addition payment. Loyalty additions hover from 40 to 60 for currently available plans. So you may not expect high and lucrative Loyalty Addition from this plan too.
4) Taxation-When you look for tax saving angle too, it lacks the current Budget modifications. To avail deduction under section 80C your premium should 10% of SA. So if you opt for Rs.10,00,000 SA then your premium should be within Rs.1,00,000 which is not possible from this policy.
Overall looks pathetic and LIC came up with this plan with sole intention of launching “Single Premium Plan”. You can easily get good returns by locking your investment in current high yielding Bank FDs for same 10 yrs and opting for Term Insurance till 60 years of your age (Remember not for 10 years because after 10 years you will not get the same life cover with same premium for what you will get now).