LIC’s Jeevan Vaibhav-Review

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).

Eligibility Conditions:-

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).

12 Comments

  1. dear sir,me 29 sal ka hun.me 200000 invest karna chata hun,jada return ke liye LIC Vaibhav ya fd konsa mere liye thik rahega.?
    after 10yrs LIC Vaibhav kitna return dega?? keya ye tex free hoga??
    Please suggest.

    Reply
    • Alpana-Aap pura article padhiye. Aapko return ke baare mein aur tax ke baare mein maloom hojayega. Mera suggestion yahi rahega ki, aap pahale Term Insurance leke apana life ko safe kijiye. Baaki amount ko ya jo FD nahin to PPF mein dalana behatar rahega (agar aap risk lena nahin chahate hoto). Thoda sa risk lekara aur aap 10 saal tak wait karana chahoto mutual fund behatar rahega aapko. Aap kya sochate hai??

      Reply
  2. I agree with your suggestion for combo investment option (SIP and Term Insurance). Really it is good suggestion but only few person continues with SIP investment and can watch up down condition of share market as SIP is completely based on market situation.

    Rather give one time investment money to LIC Vaibhav and no need to think anything about market and also not required to pay SIP installment every month. Return is also good from this policy along with insurance cover.

    If person are intelligent in investment then your combo (SIP + Term Insurance) is good option but for general person this policy is good, I think.

    Any how, thank for nice posting and suggestion.

    Thanks and Regards,

    Binod Suman
    Bangalore

    Reply
    • Binod-I agree that some sort of risk and commitment will be required to continue in SIP. But what about investing in FD or PPF with taking Term Insurance? No risk and full life risk cover right??

      Reply
  3. I am 37 years old now and I have insurance coverage Rs 5 lakhs.
    Is it wise to take policy in Jeevan Vabhav for 10 lakhs.Or better invest in others where I get more returns than LIC. and pls give me comparison between FD and LIC Vaibhav and which is best for me.
    Please suggest.

    Reply
    • Sunil-I suggest you to first cover your insurance need by taking term insurance to the tune of 10-12 times of your yearly income. Which will automatically fulfill your insurance need. Next thing, about Jeevan Vaibhav, it is low yielding product and taxability of this plan is also not in favor of investor. Hence instead of investing in such low yielding product, if you are totally risk averse person then better to opt for the PPF or Bank FDs. Else I suggest you to go for some % of equity exposure with mutual funds SIP route. Which will definitely give you better returns than this plan. So combo of term+mutual fund (either balanced or diversified, based on your risk appetite) is my suggestion. Let me know your views too.

      Reply
  4. I am 61 tears old now and I have insurance coverage Rs 5 lakhs upto 2014.
    Is it wise to take one more policy in Jeevan Vabhav for 10 lakhs.Or better invest in others where I get more returns than LIC
    Please suggest.

    Reply
    • Dear sir, Thanks for your comment. Considering your age, I recommend you to go with Bank FDs. Because in LIC’s Jeevan Vaibhav additional thing attached with investment is Insurance (not free). Which I think not required at this stage of your life. Hence it is not worth for you to go with this plan. You have better options with equal or more rate of interest than what this plan is offering you. So FD is best suitable for you. Reply if you have still doubt.

      Reply
  5. “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.”
    Dear Basu,
    My understanding of the amended 80C is that you can avail a maximum of 10% of the Risk Cover, even if it exceeds. That is, for 10 lacs if the premium is 446213, then one can avail 10% of Sum Assured (10 lacs) which is one lac and that is the maximum possible under sec80C.
    However, the amended 10(10D), would rob off the tax benefits on Maturity as the premium exceeds 10%.
    Further, you will find for a given premium, your guaranteed Sum Assured on Maturity is marginally higher in Jeevan Vaibhav.
    And Jeevan Vaibhav is available upto age 65 unlike Vridhi which was restricted to 50.
    Regards.
    T S Rajan

    Reply
    • Iyengar-I agree with what you expressed your views about Taxation. I said it in two lines but you elaborated on that. That will be a god addition to this post. Regarding my maturity amount prediction, I predicted with 9% interest rate (because Bank FDs are currently offering you 9% for 10 yr). For comparison with bank FDs I predicted this 9%. But I have not written above that from this plan you are assured with 9% return.Only Sum Assured is guaranteed which is almost double to what you pay as premium. But Loyalty Addition is not guaranteed. This what I am expressing above.

      In above article I am expressing features and reviews about Jeevan Vaibhav. I am not doing whole comparison of this plan with Jeevan Vriddhi. Hence I have not mentioned that maximum age difference between these two plans.

      Reply
  6. But after 10 years along with SA, is it guaranteed how much will get as Loyalty Addition?? After paying 2% agents commission and LIC’s expenses is it possible to deliver high LA? If after deducting Life Risk Cover premium from the LIC’s Jeevan Vaibhav premium for the above said example then the premium will be Rs.4,46,213. So to generate the 9% return, LIC need to pay at end will be Rs.10,56,348. Will LIC give you guaranteed Rs.56,348 after 10 years? If you invest the same amount in any current high yielding FDs then your returns are guaranteed right? Also in this plan as tenure being only 10 years, your life risk cover too ends after 10 years. So if you opt to take life risk cover after 10 years then it will cost you more than what it is today. Hence I recommended to purchase Term Insurance till 60 yrs of your age and put the same money in FDs to get better returns.

    Regarding 2 times of SA, as per current tax rules, if you invest in any Insurance plans then your premium should be 10% of SA to get deduction under section 80C. Suppose you opt for Rs.10,00,000 SA then your premium should be within Rs.1,00,000. Which you will not get from this policy too. Hence from tax saving front too it have that negative point.

    Hope I answered to your query.

    Reply
  7. Mr. Basu, Is not the Maturity Amount here too in Vaibhav Guranteed. You Pay Rs.489420/- for 10 lacs sum assured and you get guaranteed Rs.10 lacs after 10 Years + Loyalty . And in Vriddhi the Risk Cover was 5 times, where in here the Risk Cover is jst 2 times, so the mortality charges will also be less.. So how come this is not a better Plan ?

    Reply

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