A few months back when I wrote about “LIC Bonus rates for 2012-13 and comparison“, I flooded with lots of queries about doubts to calculate return on LIC policies. So thought to sum up all those issues and write an article on that.
I recently wrote a post which is exhaustive than this one and hope will be helpful for you to calculate returns on your LIC policies. Please check the below link for the same.
Also, watch the video I created for the same.
In LIC there are basically two type of plans either With Profit Plans or Without Profit Plans. First we will look at what do you mean by without profit plans. In such plans there will be no bonus, LA or GA payable to you and on the date of maturity, only the sum assured will be paid.
Rest of all policies come under with profit plans. Examples of the few are Endowment Plan (Table-14), Money Back Plans, Jeevan Anand, Jeevan Saral, Jeevan Ankur or Komal Jeevan.
In with profit policies you get returns based on the declaration of bonus, loyalty addition or final additional bonus of LIC. So first let us understand each component of these in detail.
1) Bonus-Bonus is the return what LIC include into your policy account on yearly base. LIC usually declares bonus rate for all policies on yearly base. Note the point that, even though it is accumulated on yearly base but you get this return only either on maturity or on death claims. Hence don’t be happy now itself that you got high bonus. Will make you familiar with bonus calculation from below example.
Suppose Mr.X take Jeevan Anand policy at the age of 30 yrs. The term of the Plan is 25 yrs and the Sum Assured opted is Rs.10,00,000. So from start to maturity period he is entitled to the bonus which LIC declares. It will get paid on maturity. If something happens to him during the period of the policy term then his nominee will receive Sum Assured+Accumulated bonus till that period. Calculation of bonus is as below.
Suppose if LIC declares bonus as Rs.40 for particular year then what it mean? It means that for Sum Assured of Rs.1,000 LIC will pay you Rs.40 as bonus for that particular year. Hence in the above example Mr.X opted Rs.10,00,000 as Sum Assured, so he will get a bonus as Rs.40,000 {(Rs.10,00,000*Rs.40)/Rs.1,000}. Now the interesting point here is, as I said above this will be included in your policy account for that particular year but will not be paid to you. The same way they calculate for each year bonus and will pay you either on maturity or on death.
Below is the list of policies which are entitled to receive bonus.
1) Whole Life Plans, 2) Endowment Plans, 3) Jeevan Mitra double and triple cover, 4) Jeevan Saathi, 5) Marriage Endowment Plans, 6) Jeevan Chhaya, 7) Jeevan Shree-1, 8) Jeevan Anurag, 9) Money Back plans etc.
2) Guaranteed Addition (GA)-In few plans bonuses is guaranteed where LIC obliged to pay a fixed amount of bonus till the agreed period. It is usually called as Guaranteed Addition. Few of such plans are Komal Jeevan and Jeevan Shree-1.
3) Loyalty Addition (LA)-This is one time payment which will be given to you only after completion of certain period (either maturity or death). As the name suggests, this is given to you by being loyal to LIC. So if for any particular plan LIC declares LA as Rs.250 for those all policies who completed 25 years then the calculation will be as below.
We again take Mr.X’s example, in his case he will be entitled to receive Rs.2,50,000 {(Rs.10,00,000*Rs.250)/Rs.1,000}. In all policies usually LA will be for each Rs.1,000 Sum Assured. But exception to this is Jeevan Saral, where LA will be on each Rs.1,000 Maturity Sum Assured.
This Maturity Sum Assured is differ from Sum Assured for Jeevan Saral. This Maturity Sum Assured is calculated based the age, term and premium.
4) Final Additional Bonus (FAB)–This is same as Loyalty Addition. Usually paid to policies whose term is more than 15 years. The calculation of this FAB is same as that of LA. This is calculated for each Rs.1,000 Sum Assured (Jeevan Saral not have FAB). Policies which have long term will usually have higher FAB.
These above four are the components which constitutes your return on LIC policy. But do remember that each policy has its own feature. Hence never believe that your policy has all the above return features. But almost all policies have either bonus or GA. LA and FAB depends on policy feature. Hope this above explanation made easy in calculating
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View Comments
sir I have been hear as lic agent since 2010, i know returns are very less in lic as compared to fd and other things, but i want to stay in field for that which policy i can promote to my clients
Dear Prahlad,
Term Life Insurance of LIC.
Hi Basu.
My Sum assured premium(Total Insurance policy for Jeevan Anand ) is 5 lakhs but i am paying 5.6 lakhs in total ( 16 years * 35683) .
Why i am paying 60k extra overall. Can it be adjusted at the end.
Please suggest.
Naveen
Dear Naveen,
It is the cost of investment to generate that final amount of Sum Assured + Bonus.
Jeevan tarang table no 178 with profits taken in 2006
15YRS
YEARLY PREMIUM 20917
Can u pls tell me if I don't opt for the pension scheme and would like to surrender the policy what amount I will b getting as total settlement
Thank you
Dear Nisha,
Better you approach the nearest LIC branch for the values.
Inprove your tone of response bro. You have open this site to help others your tone is reflecting you re doing a favour. Its no favour to anyone, you're getting money from the site and you're doing favour for yourself.
I agree you're advising people but watch your tone.
Dear Nilesh,
I am always respectful for others. However, people with some own beliefs thought that I am a representative of certain companies to earn something from them. Hence, such a strong TONE is obviously necessary :)
Amount 50000
Table no 014
Term 16 year
Plz sir tell complete amount received on policy complete
Dear Amit,
Use above post or approach the nearest LIC branch.
Thank you so much for this! Was breaking my head to understand the returns on LIC.
Dear Vachana,
My pleasure :)
How is the Vested Bonus calculated for Money Back Policies ? May I know how much I get for vested bonus ?
Sum Assured - 5 Lakhs
Payment period - 12 years
Maturity years - 15 years
Dear Eshwar,
Same like how I have mentioned above.
Hi. When using LIC premium calculator for Jeevan Umang (T 945) (Age 25 years PPT 30 years) , in the illustration document, I see 0 Rs for the column "Reversionary Bonus @ 4 percent" . I do not understand how it can be 0 Rs ?
Dear Raj,
I am not sure. But the illustration is not reality. Hence, do your own homework before buying.
forgot to mention few things. Sum assured = 10 lakhs. and column “Reversionary Bonus @ 8 percent” shows Rs 43000 per year
Dear Raj,
8% BONUS? Which LIC policy offers you such high bonus?
Sir . Can u help me in understanding my jeevandhara old policy of LIC . The policy start date is 28/06/2000 . Name is jeevandhara Table 096 term 22/21 . My 1st premium paid date is june2000 .last premium paid to lic was in june 2019. Lic suo-moto stoped accepting my premium in 2020 saying all premiums are paid & deferment is of 2 yrs . The original policy document says last premium to be paid is june 2021 . Annuity will start from July 2022 . I requested lic to look into the matter . Now they are saying i hv to pay total 21 nos premiums so they are now ready to accept premium of june 2020 but they say annuity will start only in july 2022 . As per policy deferment is only 1 year . So if my last premium is on 2020 then my deferment shd end after 1 year in 2021 . My annuity shd start in july 2021 & not july 2022. Can u help me understand. My agent is not replying to any querry
Dear Shailesh,
Better you visit the home branch and resolve the issue by interacting with the BRANCH MANAGER.
Hello I am stuck on investing , so need your help here please let's say I invest or pay a premium of 120000 yearly for 10 years and whatnwould be the best option or insurance that I should go for if I am looking for a term plan of 20 years . Example i just looked at a wealth insurance plan where I pay premium of 120k annually for 10 years and after 18 years I get close 24.5 lakhs is this really worth or how do I know if this is the best plan ?
Dear Naveen,
NEVER COMBINE INSURANCE WITH INVESTMENT. However, if you still feel 5% returns for your long term investment is worth, then go ahead.
How to calculate the rate of interest for the investment?
e.g, if I am paying 20000 Rs per year to one LIC policy and after 20 years I am getting 400000 Rs. Then How will I know, what is the return interest I received?
Dear Anupam,
Refer this post "Video tutor-How to calculate LIC policies maturity amount and returns?".
Thank you very much Mr. Basavaraj!
I struggled a lot to understand how the IRR function in excel is working. But your example in the attachment made everything clear.
Thanks again.