LIC launched one more traditional endowment plan on 9th December 2014. This plan named as Limited Payment Endowment Plan (Table No.830). Let us look into its features and review it.
As the name suggests, it is the limited payment Endowment Plan. It means, suppose you opted a term of 12 year, then you will not pay the premium for the full 12 years. Instead, your premium payment sieges earlier than the maturity period.
Below are the features of Limited Payment Endowment Plan (Table No.830)
Benefits-
Death Benefits-
On death of policy holder during the policy period, his or her nominee will receive Sum Assured on Death+Accumulated Bonus and Final Additional Bonus if declared by LIC.
Sum Assured on Death will be higher of below.
Also do remember that such death benefit shall not be less than 105% of all premiums paid as on date of death. Premium mentioned for this benefit excludes taxes on premium, any extra premium you paid and rider premiums.
Survival Benefits–
If policy holder survives till the end of policy term then he/she will receive Sum Assured on Maturity+Bonus+Final Additional Bonus (if declared by LIC). Here Sum Assured on Maturity is equal to Basic Sum Assured.
Let us take an example. Mr.X, whose age is 35 Years and buy this plan for a term of 21 years (I preferred a long term, as insurance agents usually pitch for long term product while selling) and premium paying term as 9 years. He opts the sum assured of Rs.3,00,000. Then the premium he has to pay for the next 9 years will be Rs.22,398.
Do you know, earlier LIC had a plan called Limited Premium Endowment Plan? It was closed after the recent IRDA changes. Currently bonus for that plan is Rs.48 per Rs.1,000 Sum Assured for a plan, which is more than 20 years old. Therefore, we consider the same bonus rate for above example. Also, let us consider that FAB for this plan will be at Rs.70 per Rs.1,000 of Sum Assured (I consider this too at the higher end). Then what will be return from this plan? It is around 7% only and that too if you invest for 21 long years. Otherwise, if you reduce the term, then return will be around 5% to 6%.
Whether you still eager to buy?
If you feel that waiting for long 21 years and expecting 7% return is good for you then go ahead. However, to be true, you can get more than this plan by simply investing into PPF and buying a term insurance from LIC itself. The tax benefits will also match with this plan. Decide yourself before committing to this trap.
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View Comments
Can u pls revise ur calculations with below changes?
PT 12yrs
PPT 9 yrs
deduct the equivalent premium of term plan (35ys age, PPT 21, SA 300000) from the outgo.
your IRR shall shoot up by 0.5 to 1 %
B-So you mean to say it will give 10% return?
Never said that..!!!
against 7% that u r showing it may show may be 7.5% or something of there about....if that's the case isn't it good??? tax free..(eq to 10% taxable FD)
by the way neither am I an LIC agent nor I have any money back / endowment etc policy...
just for the sake of a calculation..
B-I am not blaming and your views too. Even though you feel 7.5% tax free for long term attractive, the biggest issue with LIC plans is liquidity. I will consider this as a debt product. Hence, while reviewing you feel hard to rebalance the portfolio as per the defined asset allocation. Hence, I avoid such illiquid products.
I fully agree with u. Even my portfolio is almost fully liquid with zero RE and some physical gold.
I was just trying to take a neutral view of the product.
B-I appreciate your views and investment style. Liquidity is the KING for any investor (even though goal is long term).
i am planning to make a policy endowment plan of sum assured 500000.
for 12 years term and premium 9 years and as per my age premium for 9
years would be around 54740.
I have heard that if the premium is more than 10 % then it will be
taxable on maturity.
So please suggest me what can i do ??
Vishal-Refer my earlier post "Tax Benefits of Life Insurance".
Hi,
I bought the limited premium endowment plan for my dad this year.
The agent is a total fraud. He dint tell me all the details of the policy.
I want to log a complaint against him.
What can I do?
Will that be of any help?
Reshma-To be frank, it will not help you. Because I think agent not given any assurance in WRITING. So how can you prove his fault or fraud?
Hi Basu,
Recently an LIC agent suggested LIC’s Limited Payment Endowment Plan (Table No. 830). In your blog, it is mentioned that the plan doesn't generate good returns as there are other ways to get good returns.
I am 29 now and can invest 50,ooo - 75,000 an year. Kindly suggest one good plan for investing and another plan in LIC for life insurance.
Samrat-For life insurance, you can opt for LIC's online term plan. Regarding investment, I don't know much of your goals. Hence, hard to suggest.
I am 47 year old having 2 children's, yearly income 2.5 lacks , have an lic policy - 6000/- yearly premium, want to buy another policy , pls suggest
One lic agent approached me with the limited payment endowment plan ..my age is 31 payment term 10 yrs .. maturity after 30 yrs.. total premium to be paid in 10yrs is 8.48 lacs .. and after 30 yrs ,he is giving guarantee of 56 lacs.. is d plan appropriate to invest . Our main purpose is retirement n also death benefit .
Pratik-First of all the maturity amount is somewhat at higher side. Second point, even if we consider that your AGENTS MATURITY VALUE is correct then the return on investment is around 8%. You are saying that your main purpose of investment is retirement and death benefit. In what way this 8% return can build you a great retirement corpus when inflation itself is around 7%? Also think for how long your family survive with the insurance coverage this plan is offering? Rule first, never combine insurance with investment. Rule second, for long term goals, invest in a product which beats the inflation. Then only you sustain. Buy Term Insurance and forget insurance part.
I am 29 years old I just start this policy but I don't know how many gate the money after 21 years
birth date 25 march cheque paid dtd 25 march 2015 quarterly amount is 5745. please give mi details
Nirmala-Return from such policies will be around 5% to 6%.
Hi
My policy is endowment assurance with profit table 14
Policy start 25/o2/2009 after paying first premium the policy got lapsed and now I wanna restart my policy they ask around 65000 including premium and late payment to restart my policy I wanna ask is right to restart this policy or buy new policy and what amount I get on maturity ?
Sum assured : 200000
Tenure : 20yrs
Yearly Premium:9597
Maturity date :25/02/2029
Hi Basavaraj,
I contacted an LIC agent and he suggested Limited Premium Payment Endowment plan and said that I could use this to get returns on the 16th and the 21st year. I am 45 years old. The agent also said that I can convert this plan into a Pension plan and I need to declare this 6 months before the 16th year. The payment he said is only for 8 years . The premium depends on my affodability and what I want to get as return. The agent also said that the Insurance Cover is there for Death due to Natural causes and Accidents etc in this particular plan and the returns are absolutely non-taxable.
Is this a good plan as compared to State Bank Retirement ( Pension ) plan or do you suggest some other plan. Kindly sugges
Rgds,Manohar
Manoharaj-But what returns he quoted?
Sir,
I am 53 years old and working in a private firm. My son completed B,Tech and daughter is persuing CA. I can paid app 15000/- per year as premimum. Wants to take whole life cover of maximum amount and some maturity benefits. Please suggest suitable policy.
Regards,
Anil Kaushik
Anil-Why whole life plan?