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).
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.
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.
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.
# 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
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.
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.
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-
# 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 policy within 2 years from First unpaid premium (FUP).
For this purpose, I considered the values as below.
Age of Policy Holder-30 Yrs.
Sum Assured-Rs.2,00,000.
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.
My take on this plan is SIMPLE and will point down as below.
Hope my review will benefit about taking your decision on this plan.
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View Comments
Hi sir,
I am investing in Jeevan Umang (945) plan since last 4 years. Since withdrawal/ surrendering the plan is not a better option, can I stop paying the premium and convert the policy as paid up policy so that I can get proportionate benefits.
Dear Akshay,
yes.
I understood that this old Umang plan (845) is not worth investing and it was withdrawn already.
But could you please cover / suggest the newer Umang plan (945)? Is it still not beneficial?
I'm 30 now & looking for good returns after 15-20 years of rightful investing.
Dear Mani,
The story is the same. No change in my views.
Hello Sir,
This is in reference to the new jeevan umang (945) plan. I am seeing the surrender value (cash value) too high once I have finished the premium paying term from the quote which I got from the agent. But on lic website the surrender value is too low. For eg, on a 15 year policy at my age of 32 for a sum assurred of 25 lakh, I can see that after 20 years, I can get a surrender value of around 48 lakh from agent's quotation but lic website's quotation showed me as 22 lakh. So why this is huge difference? and what will be the amount I will be getting after 20 years (that means I have collected 2 lakh per year for 5 years and then want to surrender my policy). Please tell me the correct thing.
Dear Devendra,
Always rely on LIC data than agent's data.
I have this plan Jeevan umang 845 when the agent approached me he said after three years I can surrender this policy and get the amount I paid for three years ...can I surrender and get the amount ?
Dear Jimmy,
Yes, but you get less than what you paid.
So we can't withdraw the amount at a single time?? From lic plan 845
Dear Akshai,
NO.
Sir,
I took this plan for my mother.She is currently 45 yrs old and paying 3,352rs per month and policy term is 15 years for plan umang 845. I have a doubt and that is, can I withdraw the sum assured ie,5,00,000 after this 15 years of investment at a single time and if so what all benifits will I get with it.I just got an NPS after I took this plan and that is enough for annuity pension ,so I need the full matured money after its policy term..Is it possible to withdraw the whole money at a single time and what all will I get with it??
Plz reply sir
Dear Akshai,
Sadly NO.
Can you please suggest a good investment option. I was thinking of a mutual fund and a term plan but can't decide which ones to go for? Which are the best mg and term plan options available currently?
Dear Lidwin,
Hard to say BLINDLY.
Sirji,
Now days banks are distributing house loan and they got return@8percent,Then why the bank s don't invest in mutual funds for more returns.
Dear Santoshkumar,
Lending is ASSURED RETURN but not MUTUAL FUNDS.
Thank you for the article. Looking at the comments, it seems I am late to the party ;)
I ended up reading about this while looking to secure a guaranteed annual income. This plan gives me corpus and risk but for me, like for most people, these are already covered by MF/PPF and term plan+ previous LIC policies, respectively.
Would you suggest any alternative (LIC or otherwise) which helps me to plan for pension more rather than getting other benefits which I have already planned for separately and can expand upon as needed. Essentially, max pension for the amount I will be putting in for next 20-25 years.
Dear CK,
Recommendation depends on analyzing your financial life. The blind recommendation is dangerous to you.
Hi Basavaraj - I really like the content you jot down bcz I was unable to figure out the cons in this policy so it's good to hear the same. But I did a few calculations from which I was unable to figure out an alternative instrument from where I get ~6.5 - 7% interest after taxation.
Based on the cash sum (surrender amount) quotation I got from a LIC agent I found below no's (current age - 27yrs):
IRR (at age - 40 yrs) 1.77%
IRR (at age - 50 yrs) 6.81%
IRR (at age - 60 yrs) 7.41%
IRR (at age - 70 yrs) 6.88%
IRR (at age - 80 yrs) 6.09%
URL to my calculations - https://docs.google.com/spreadsheets/d/1rmcm7HX8T1Wv6LBdclNnGuesToO8Qu_JbGIHxDu58Tc/edit#gid=0
I am considering this as a pure investment not life insurance (took Tech Term Plan from LIC for it) but couldn't figure out an alternative investment instrument to this.
It would be really great if you can please help me with your suggestions bcz I won't get EEE benefits from PPF above Rs1.5L investments which I can get from this plan.
PS: I earn ~Rs 30L annual income so want to have some safe investment as well apart from MF
Don't get confused....Here is guarantee for life....It's a biggest benefit, that gives you peace of mind for life....
Dear Mahesh,
GUARANTEE at what cost??
Akshit,
Unable to find the safe products? What about PPF or tax free bonds?
Sorry I was referring to risk-free investment instruments. I already invest 1.5L/yr in PPF (don't invest more as it'll attract tax on it) & some amounts in T-bills but don't know about tax-free bonds (EEE) which can make me earn more/equal amount that this scheme (Jeevan Umang)
Dear Akshit,
You are not allowed to invest more than Rs.1.5 lakh in PPF. It is not because it will attract tax but the maximum limit in PPF is that much. LIC policies are illiquid in nature. How you manage your asset allocation with respect to your goal time horizon? How you liquidate and rebalance again? There are many safe ways to look for liquidity and safety. You just have to explore the ideas.
Yeah, I got confused about the PPF thing. Also, I agree that LIC policies are illiquid in nature considering that for the next 20yrs I can't take out my money otherwise it's a waste.
Asset allocation:
MF (70%) [majorly long term >5yrs] ; PF/EPF (10%) [tax saving], FDs/T-bills/G-Sec (10%) [liquid asset] ; Bank (10%)
Liquidate & Rebalance: Not done frequently.
Can you please point me to the right policy or financial instrument for better liquidity & safety so I don't have to take this Jeevan Umang policy and build the same kind of plan myself by investing on my own terms.
Dear Akshit,
Use EPF (even VPF) as debt part of your retirement goal and PPF for other goals debt part. Keep around 10% to 25% in either Liquid or Arbitrage Funds to make sure that asset allocation should be easy. No need of any extra product.
Thanks a lot Basavaraj, VPF is good never thought about it seriously but now read about it & seems like a v good instrument from the retirement perspective.
Also, I'll figure out liquid & arbitrage funds as you pointed.
Dear Akshit,
Sure.
Thank you for helping me out in this as now I am convinced that Jeevan Umang doesn't make sense bcz IRR that I'll get in it at age of 60 will be the same in EPF/VPF & it'll be consistent across years so I have option to withdraw it anytime after 5 yrs.