Today LIC launched new plan called “Jeevan Sugam”. It is a non-linked single premium limited period plan. This plan will be available for 45 days from now. Let us look at features and who can invest in this plan.
Features:-
Let us take one example. Mr.X who is 25 yrs old want to invest in this policy. He want to opt for Rs.5,00,000 MSA (Maturity Sum Assured-which is guaranteed amount you receive from this policy). So the amount he need to invest is Rs. 2,86,539 (including service tax). Sum Assured available throughout the period is Rs.27,79,500 (10 times of single premium). Now during the first 5 years of policy if his death occurs then his nominee will receive Rs.27,79.500. But if his death occurs after 5th yr and within 10th year then his nominee will receive this Rs.27,79,500+LA (which is unknown as of now and will be provided as per the rates available at that time). If Mr.X survives till maturity then he will receive the MSA which is Rs.5,00,000+Rs.22,500 (Additional MSA at 4.5% of MSA)+LA.
Is it worth to invest?
Even though premiums may looks as if same but difference of premium for the minimum age (8 Yrs) to maximum age (45 Yrs) for above calculation is Rs. 1,02,884. So if you want to invest in this plan then better to invest in your spouse or kid name to benefit the age factor. Considering the other options available like bank FDs, this plan looks attractive in terms of tax angle too. You can avail the tax benefit under Sec 80C during the period of investment (For insurance policies issued on or after April 01 2012, deduction is allowed for only so much of the premium payable as does not exceed 10% of the actual capital sum assured). Also you can avail the tax benefit under Sec 10(10D) post maturity also under current income tax laws (For insurance policies issued on or after April 01 2012, exemption would be available for policies where the premium payable for any of the years during the term of the policy does not exceed 10% of the actual capital sum assured).
Liquidity is the major drawback of this plan compare to Bank FDs. Because in Bank FDs if you want early withdrawal you will get your invested amount full+interest till that period (which is lesser than the normal rate). But in this plan straightaway you will receive less than what you invested. Hence if you are sure about your waiting period of 10 years then best option.
Let us consider same case to compare the returns. I am considering LA as 10% of MSA which is fair in my view.
Point to be noted:-
1) If in above calculation of this plan we considered Rs.1,00,000 one time investment and person investing is under 10%, 20% or 30% tax bracket then the yield may be higher. Because in above example investable amount is Rs.2,86,539, but we can avail tax exemption upto Rs.1,00,000 under Sec 80C.
2) I have not included cess (which is 3% on tax amount) for calculation purpose as it may not make that much difference while calculating yield.
3) For calculation purpose under Term Insurance+Bank FDs, I considered LIC’s term plan which is high priced than the private insurers. So if you take term insurance from other insurers which is cheaper, then your overall yield will be higher than what I calculated.
4) For calculating FD rate, I considered current SBI’s Term Deposit rate.
From above calculation it clearly shows that competition is neck to neck. So if you chose this plan for your investment then their will not be any harm.
Hence this plan is good for investors who are risk averse and looking for some kind of life risk too. But parking all your portfolio in such low yielding product may not be worth for your long term financial goals.
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View Comments
I am 22 years and already have 4LIC Policies and I want to invest 10K more anualy so please suggest me where should I invest in LIC/FD/MUTUAL FUND/ULIP also specify particular which corp. will be best for that type of iinvestment. Thank u Sir, your review s are very uaeful.
Rahul-First cover your life risk by term plans. Then based on your financial goals start investing.
Sir
I posted a comment as a reply to your another response.
So, posting the comment below again for clarity sake. Also rewording my question slightly differently.
I am 41 years old. Looking for an insurer who can give a life cover by a term. Which insurer is most trustable one?
I tried with LIC. They asked me to go on tests again and again and I finally gave up. the same is the case with my friends too.... So, can you suggest the right Insurer who would give me a term policy?
And another question on Jeevan Sugam.
Can I look at this policy as a means to get a higher life cover even though my returns are too low (considering the age factor i.e. 41 years)? Say, if I invest 100000 now as a premium, how much I would get as Life Coverage?
Regards, Velmurugan
Velmurgan-I am happy with your decision that you opted for term insurance. To be frank, LIC's term insurance is costliest in the market. Instead better you choose online term plans available with private insurers. In my view better either go with ICICI or HDFC but you may choose with your comfort too. Also better to take online with disclosing all materiel facts and sharing about this cover with your family members. Because usually in online term plans their will not be middlemen, so your dependents may feel heat if they don't know exactly to whom and how to approach.
Don't go for any policy other than term plans.
Dear Sir,
Thank you for your response.
One question on the role of private players in the field of insurance...
How safe it is to insure our life with private players? they are not like LIC that has the backing of Government. I know IRDA is there but how strong it is when it comes to private players?
Can we really trust them for a long term association with them? Would they not close their Insurance division once they find that they are running in lose or too many claims happening? Or would they increase the premium over the time period?
I heard from one LIC agent that these players increase the premium from time to time. I don't know if that is true or not. but he mentioned.
Could you please guide me? Is there any law that allows them to do so?
Regards,
Velmurugan.
Velmurugan-You can trust equally LIC. Reason is, as you told IRDA will always monitor and all insurers need to maintain solvency ratio as a safer way of claim in case of closure of company. Their may be service related issues which may differ from insurer to insurer including LIC too. So based on your comfort you can choose the company. But never forget that hiding materiel fact may lead to reject the claim. Regarding the increase in premium from private insurer, I too hearing it first time. Ask your agent to provide the proof of that. Because usually in life insurance premium will be constant throughout the period.
Now it is left with you to decide which insurer is safer. For your information, expecting a good service from LIC too is risky. I am saying this line being an agent of LIC and monitoring how they do service. Think and decide :)
Thank You so much Sir.
Your guidance is very valuable.
Regards, Velmurugan
Velmurugan-Pleasure :)
ok sir
my dear BasuNivesh sir
thanks for your comments my brother age is 22 & 28 any medical certificate/examination required for buying 5 lac policy jeevan sugam pl advise tks bi bi
Elumalai-In my view not required. But why you are so afraid of medical examination? If their are some health issues then it is better to disclose yourself to avoid future trouble in claim settlement. If no such health issue then let them do what test they need :)
pl send msg as it is tks
Elumalai-Can you let me know what is the exact need of your above line?
i am 30 years old i want to get a premium of 20k .Let me know how much i should pay and plan details
Anitha-For your age you are saying able to pay 20k, which is not possible in this plan.
Hi,
What is the difference between this plan and Bima Bachat or other Single premium Policy's from LIC
Rajib-Lot of difference, like Bima Bachat is like money back plan. But in this plan returns are after maturity only. Sum Assured is good option than Bima Bachat. So you may consider this as improved version of Bima Bachat.
BasuNivas : Thanks a lot.
Actually,i am looking for plan that will give me equal or better benefit over FD as i think in FD Matured amount is Taxable that i want to save.
Can you please suggest best available options for the same,so that i can think forward.
Thanks,
Rajib
Rajib-In that case you can try with this plan else currently some tax free bonds are also available, you can do that also.
@BasuNivash : With respect to interest rate, which option is better ?
Rajib-If you look for interest then all are almost equal when tax comes into picture. So choice is your's.
@Basu : Correct !!!!
Thanks a lot
Rajib-Pleasure :)
Hi Basu,
Thanks a lot.
One more thing i am having a LIC ULIP policy where i invested Rs 90K for 3 years ,But now its value id Rs 86400k.
As per plan,if this amount will be matured after 8 years.
What do you suggest, should i wait for more 5 years or i should invest that money with other plan or so.
Awaiting for your reply.
Thanks,
Rajib
Rajib-That's the cost you are paying now for your agents bad advice. Anyhow better to come out and invest according your financial goal but not according to your agent's financial goal :)
Hi Basu
i have few queries,iam having son aged 4 yrs,i want to invest for his further studies can you suggest which is the better plan for investment.
Ekta-Your plan is long term. Hence better to go for equity exposure with mutual fund route of SIP. Also not forget to cover your life risk by taking term insurance.
My children are 19 and 13. Can you please suggest the minimum amount to invest in this plan?
Sudharsana-For 13 yrs kid minimum amount to invest is Rs.33,661(life risk will be Rs.3,26,520) and for 19 yrs kid minimum amount to invest is Rs.34,147 (life risk will be Rs.3,31,230). For both cases MSA will be Rs.60,000.
dear basu,
i hav few queries related to this paln.My age is 25 n i am lokking forward to invest in this plan.I will be investing 30k, pls guide me for minimum locking period, charges on premature withdrawal, sum assured amount, tax benefit on premium paid n sum assured received, limitaion(amount to be invested) n lastly is it a one time investment plan or can be invested periodically.
Pls help me all the details...dont forget to mentioned ur calculation.
Waiting for ur reply....
Hitesh-For your age minimum amount of investment is Rs.34,385. Rest of your doubts will be get cleared once you go through the above full article.
I cant u/stand d plan nicely.1st ly is it granteented plan? how much will I get after 10 years at maturity not my nominee after death. I am 36 years old. Plz rep soon.
Anulekha-In this plan only MSA is guaranteed. Apart from MSA (maturity Sum Assured), you also receive Loyalty Addition which is the only part that is not guaranteed. Suppose you opt for Rs.10,00,000 MSA, based on your age they fixed the premium which is Rs.6.08,592. So MSA of Rs.10,00,000+Rs.Rs.1,95,000 (4.5% of additional MSA for opting higher MSA)=Rs.11,95,000 is guaranteed. But LA on this is not guaranteed. Hope I cleared your doubt.