LIC will be launching one more new plan from 16th May 2017. This plan is called as LIC’s Jeevan Umang (Plan No.845). This is the typical whole life plan.
LIC’s Jeevan Umang (Plan No.845) is a non-linked, with-profits, whole life assurance plan. This plan is the replica of the old closed plan of LIC (Jeevan Tarang Plan No. 178).
Features and Eligibility of LIC’s Jeevan Umang (Plan No.845)
Let us first see the eligibility of LIC’s Jeevan Umang (Plan No.845).
You notice one thing from above image, even though the age of maturity is fixed as 100 years, the maximum for entry in all cases is 70 years. So the assumption from LIC about life expectancy is 70 years.
Date of commencement of risk in LIC’s Jeevan Umang (Plan No.845)
If age of Life Assured is less than 8 years on date of buying the policy, the risk under this plan will start either one day before the completion of 2 years from the date of commencement of the policy or one day before the policy anniversary coinciding with or immediately following the completion of 8 years of age, whichever is earlier. For Life assured aged 8 or more,
This means, let us say the Life Assured age is 5 years, the life risk will start one day before the completion of 2 years from the date of commencement of the policy (when the life assured is at the age of 7 years) of one day before the policy anniversary coinciding with or immediately following the completion of 8 years of age, whichever is earlier. But in this case, the risk will commence at the age of 7 years only.
Let us say the Life Assured age is 7 years, in this case, the life risk start immediately following the completion of 8 years of age.
For Life assured aged 8 or more, the risk will commence immediately.
Benefits of LIC’s Jeevan Umang (Plan No.845)
In this plan, you will be eligible for three types of benefits. One is at the time of death, the second type is survival benefit and another one is maturity benefit. Let us discuss one by one.
Death Benefits of LIC’s Jeevan Umang (Plan No.845)
# If death occurs before the commencement of Risk
An amount equal to the total amount of premium/s paid without interest shall be payable
# If death occurs after the commencement of Risk
Death Benefit, defined as the total of “Sum Assured on Death” and bonus and Final Additional Bonus (FAB), if any will be payable.
Meaning of Sum Assured on Death is defined as the highest of
- -10 times of annualized premium or
- – Sum assured on Maturity or
- -Absoluannualizedassured to be paid on death ie Basic Sum Assured
The death benefit will not be less than 105% of all the premiums paid as on date of Death. Premium referred here will not include any taxes, extra premium charged due to underwriting decision and rider premiums.
Survival Benefits of LIC’s Jeevan Umang (Plan No.845)
On the life assured surviving to the end of the premium paying term and all the premiums in policy have been paid, a survival benefit equals to 8% of Basic sum assured (BSA) shall be payable each year.
First survival benefit will be paid at the end of the premium paying term and thereafter on completion of each subsequent year till life assured survives or policy anniversary prior to the date of maturity, whichever is earlier.
Maturity Benefits of LIC’s Jeevan Umang (Plan No.845)
If policy holder survived till the policy term, and have paid all premiums timely, then LIC will pay Sum Assured on Maturity+Bonus+Final Additional Bonus (FAB).
Here, Sum Assured on Maturity is equal to Basic Sum Assured (BSA).
Let me explain the same with the help of below image.
Note below points-
- During premium paying term, you will not receive any benefits. If death occurs during this period, your nominee will receive Sum Assured+Bonus+FAB.
- Once the premium paying term completes, then you will receive 8% of Sum Assured till the maturity period or death of the policy period.
- If policyholder survives till the term of the policy, then again at the end he will receive Sum Assured+Bonus+FAB.
Other Features and benefits of LIC’s Jeevan Umang (Plan No.845)
# Premium paying modes- Yearly, Half-yearly, Quarterly, and Monthly (Monthly mode is only available with SSS and NACH mode).
# Policy can be surrendered during the policy term provided at least 3 full year premiums have been paid.
# Loan Facility-You can avail loan after completion of 3 policy years and up to premium paying term. The maximum loan payable is a) Up to 90% of surrender value in force policies b) Up to 80% of surrender value in paid up policies.
# Free look period-15 days available from the date of receipt of policy bond if the policyholder is not satisfied with the “Terms and Conditions” of the policy.
# Assignment-As per Sec.38 of Insurance Act 1938 allowed. Nomination required as per Sec.39 of Insurance Act 1938.
# Lapse Policy revival-You can revive the policywithin 2 years from First unpaid premium (FUP).
How much is the return from LIC’s Jeevan Umang (Plan No.845)?
For this purpose, I considered the values as below.
Age of Policy Holder-30 Yrs.
Premium Paying Term (PPT)-30 Yrs.
Policy Term=100 Yrs-30 Yrs=70 Yrs.
Premium-Rs.6,621 (Inclusive of tax).
Bonus Rate-Rs.50 per Rs.1,000 per year. I considered this value as this plan exactly matches the LIC’s old plan Jeevan Tarang.
Final Additional Bonus-Rs.3,550 per Rs.1,000 Sum Assured (Remember that it is the one-time payment, payable at maturity or death).
The results are as below.
You notice that up to 30 years of a term, he will pay Rs.6,621 as premium. From 31 year, he will receive the survival benefit at the rate of 8% till maturity. Again on maturity, he will be eligible to receive the Sum Assured+Bonus+FAB.
I considered as if the policy holder survive until the age of 70 years. However, if we consider that he dies before attaining the age of 70 years, then the returns will be less than what he invested.
Even though it looks too attractive that you have to pay up to 30 years and from 31st year onward to 70 years 8% GUARANTEED return and again if you survive till maturity, then one more time you receive the benefit.
But you calculate using the IRR function of excel sheet (which is the way to calculate your return on investment), it shows just 5.26% returns.
Review of LIC’s Jeevan Umang (Plan No.845)
My take on this plan is SIMPLE and will point down as below.
- This is the combination of whole life plan and money back plan. Hence, premium looks cheaper than the regular endowment or money back plans. But this plan bears its own risk of holding the plan at the long term.
- Returns are pathetic. As I explained from above sheet, the return will hover around 5% to 6%. So do you feel it a great investment?
- This is the not the pure whole life plan. Hence, you will not enjoy the higher bonus rate (for whole life plans LIC offers the bonus rate of Rs.70 per Rs.1,000 Sum Assured). But this is the replica of LIC’s old closed plan Jeevan Tarang, whose bonus rate is not more than Rs.50. Hence, if your agent lures you as if the HIGH bonus policy as this is the whole life plan, then simply ignore that suggestion.
- Buying a term insurance with a simple product like PPF will generate you more return than this plan. Then why to stick to it for so long?
- Taxation is the major motive point for many of us to invest in such products. But do remember that the products I recommended as an alternative to this plan will have same tax benefits as this plan.
- Liquidity is the biggest concern with such plans. Hence, better to stay away.
- If at all your concern is looking for cheapest insurance cover and reliable insurance company, then why not buy the term insurance from LIC itself? NO risk at all for many to buy term insurance with LIC and invest in PPF.
Hope my review will benefit about taking your decision on this plan.