It is common practice by almost all agents to sell the products which they actually know. But I noticed during my search for LIC’s plans that Whole Life plans are I think untouched or neglected plans. Hence thought to give inputs how well they are and what are the drawbacks of these plans. First let us look at it’s feature.
In LIC’s whole life plans their are two variants. One is the plan where you need to pay throughout your life span. Another is called Limited Payment, where your premium paying is restricted for few years only (like 15,20,25,30 and 35 yrs). Below are the few important features of these two plans.
| Whole Life-Premium Payment throughout life | Whole Life-Limited Payment | |
| Min. Age | 15 Yrs | 12 Yrs |
| Max. Age | 60 Yrs | 60 Yrs |
| Max Maturity Age | 80 Yrs | 80 Yrs |
| Min. SA | Rs.50,000 | Rs.50,000 |
| Max. SA | Unlimited | Unlimited |
| Loan | Available | Available |
Maturity Benefits-Under first variant, policy get matured after the policy holder attaining the age of 80 yrs or after the completion of 40 yrs from the commencement date of policy. For second variant, policy will get matured after the policy holder attaining the age of 80 yrs. In both cases you will get Sum Assured+Accrued Bonus+Final Additional Bonus. One more benefit offered is, if policy holder can postpone his/her maturity proceeds later dates too. In that case he will continue to enjoy the benefit of available bonus rate till he takes back the maturity proceeds.
Death Benefits-If death occurs during the period of policy term then nominee will get Sum Assured+Accrued Bonus till the date+Final Additional Bonus.
Now the positive points of this plan are, lower premium compare to other LIC’s plans and enjoys the highest Bonus rate. So automatically you can enjoy high returns than other plans. Let us take example of 30 yrs old person who opt for limited payment 35 years. I took 35 years because in this plan maturity will be at policy holder’s 80 yrs of age. So instead of paying high premium better to lower it and opt for higher Sum Assured. Sum Assured I opted is Rs.25,00,000 and the yearly premium for him will be Rs.66,375.
Let us look at returns how much he can get if he attains the age of 80 yrs. Overall he pays Rs.23,23,125 for the whole 35 yrs of premium paying period. Maturity amount he will receive will be Rs.25,00,000 (SA)+ Rs.87,50,000 as Bonus (Calculated at the current rate of Rs.70 for SA of Rs.1,000)+Rs5,62,500 Final Additional Bonus (Calculated at current FAB for more than 25 yrs term policy and SA more than 2 lakhs which is Rs.225 for SA of Rs.1,000). So total he will receive Rs.1,18,12,500. Overall IRR (Internal Rate of Return) workout to be 4.71%. Now few may say who will live till the age of 80 yrs.
Suppose if he lives only till the age of 60 yrs ( I considered 60 yrs because most term plans maximum maturity age is 60yrs) then from his current age of 30 years to his age of 60 yrs he will pay Rs.19,91,250. If we consider his untimely demise in that year means his nominee will get Rs.25,00,000 (SA)+ Rs.52,50,000 Bonus (Calculated at the current rate of Rs.70 for SA of Rs.1,000)+ Rs.5,62,500 as Final Additional Bonus (Calculated at current FAB for more than 25 yrs term policy and SA more than 2 lakhs which is Rs.225 for SA of Rs.1,000). So totally his nominee will receive Rs.83,12,500. In this case IRR works out to be 8.54%. So infact this shows good returns than the 80yrs of maturity returns.
So compare to other traditional plans and when you are buying insurance with the sole intention of creating some corpus for your dependents then it is best to park few % of your portfolio into this plan. Eventhough returns looks low, in first case it is 4.46% (probability of attaining 80yrs of age less :))and in second case 8.54%, but when you are looking for secured returns with bit of life risk cover then better to park here. This plan also holds good for few people who think Term Insurance as waste product where you will not get anything in return during the life time and in case of death only SA. Hence I recommend you to have this high Bonus plan for creating wealth for your dependent. But as usual I am cautioning not to park all investment into this product instead some % of your portfolio. Happy Investing 🙂
View Comments (47)
Sir
Im finding that LIC have huge premium difference when u compare it with private company, why it is so
is something to do with CSR
LIC endowment plan 814 and LICs whole life plan are same things???? IS these plans are still running.
Can you little highlights the advantages of LIC whole life plan.
I read online they have given some examples in tabulate form but mentioned in NOTES: for non-smokers only.
Is smoking or such habits a hindrance in this whole life plans
Gaurav-Whole life plan is not available now.
Dear Basu
Good article, above all good jugal- bandi with Dubey and their likes. Never knew about the LIC agent's commission. Now understood why they were ready to even bear the first premium!!!:-
I did not read all the comments began with Jeevan Tarang plan. Instead of writing down the positive and negative points about the plan itself, the statement involving agent commission, totally diverted the subject and interest.
These details about agent commission could be avoided, and if not possible in terms of giving all the details from various angles, these could be put at the end of explanation of the plan.
On similar note, the person did not mention anything about the commission in the details of whole life plan. How come this?
Vivek-Where comes the Jeevan Taran Plan here? What is your point of commenting? I am unable to understand what you want to say.
Hello sir,
Can you give your opinion about Aviva's new Family Income Builder plan & Young Scholarship plan (for children)??
Whether they are good?? Or any better plans other companys are offering??
Regards
Mahadev
Mahadev-NO INSURANCE PLAN for kid's education and marriage expenses.
Sir,
Aviva is having Young Scholar secure plan for children in which (considering child age 1yr ) if we pay annual premium 50000 for 13 yrs, from 13th yr onward ( assuming child is in 8th standard) company will give payouts Rs 20000 per year upto 17 th year.On 18 th year company gives 1lakh rupees. & on 21st year 10,50,000 will be paid. SA in this plan is 12,50,000. Death benefit is 1250000
Considering age of child is 0 years & age of life insured (parent) 29 yrs.
What is opinion about this plan?? Good or bad?? plz comment
Mahadev-Let me know how they arrived at these eye-opening return figures? Rosy picture will always be different from the reality and the agent or manager who is selling you now may not be in the same company or in same position after 13 Yrs :)
Sir,
Aviva's agents & managers are showing these figures on paper.. that too they are telling as guaranteed...
What is your opinion about this plan?? Is it not realistic?? Shall I proceed or not??
Mahadev-If it is GUARANTEED then let them claim it on offical policy bond or written from Aviva. These agents or managers don't know themselves where they will be after few years. In that case to whom you contact?
SIR,
On premium quotation it is clearly stated as Guaranteed survival benefit, Guaranteed death benefit, Guaranteed maturity benefit etc. This quotation is from Aviva life insurance company India Ltd only with company's stamp on it.
If it is in written form then can I proceed??
Mahadev-Guaranteed survival benefit, death benefit or maturity benefit are minimum to what they quote. However, have you thought what return you get if you surive? Usually these gauranteed are minimal to protect of buyers to get something. But not the real return. Think and decide at your own risk. I still suggest you not to run behind such plans. Buy online term insurance to the tune of 10-15 times of your yearly income then forget these insurance products.
Gd evng sir,
For my mother age 50 yrs, Is the whole life plan is best or not?And which plan comes under whole life plan.
what should be SA and PPT and for what term?
Pls reply.
Why cant you educated people on Jeevan Tarang and Jeevan Arogya Plan of LIC.
Also your comment , the impact of changes which we expected from 1st October 2013 onward where all existing plan of insurance company will be replace with new version
Bankim-Let me do it on this :)
tell me prons and cons of LIC jeevan tarang policy
Rakesh- Features of Jeevan Tarang.
1) It is LIC plan so plenty of attachments for Indians.
2) Your agent's commission will be 35% in the first year, 7.5% in second and third year and 5% from next year onwards. It means of selling this plan your agent will be happy and his future is secured for an equal period of your term.
3) This is the whole life plan.
4) Eventhough it guarantees yearly payment after maturity till the 100 years of age, but how many of us live so longer?
5) Returns are low of around 5-6%.
6) So final call will be not to go with this plan.
Mr. Basavaraj Tonagatti , every one get more valuable knowledge by your page,but when u reply to rakesh July 18, 2013 at 8:37 AM I think you should explain about Jeevan tarang not about Agent ,no any one will do any FREE service. What u think ?
Dubey-I agree no one will give free service on this earth. I just make him aware about everything including the earnings of his agent. It is just making reality in all aspects including the agent's commission on this particular product (which no agent will share). That is what I did, there is no other motive to degrade any profession.
http://economictimes.indiatimes.com/markets/stocks/market-news/lic-rbi-save-the-day-for-sensex-rupee/articleshow/22118867.cms
Shivakumar-It is just day to day activity in market. Nothing more than that. I will ask you one question-After so much high agents commission, administrative expenses and other charges do you know how much return LIC need to generate just to arrive at around meager return of 7%? Suppose one invested Rs.100 with LIC (or some private insurer) in traditional plans then after deducting these expenses remaining amount will be around Rs.75 to Rs.80. To make it to Rs.108 in a year returns from any investment will be around staggering 44%. Which product on this earth will generate such high return?
Mr.Subra of famous blog subramoney once said traditional plans are most dangerous products than ULIPs. Because in ULIPs atleast one can understand the expenses structure but in traditional products all are hidden.
The calculations by you are for first year only. Next year onwards expenses comes down drastically. It is easy to manipulate the clients by saying returns are not as high as ULIPs. But whenever you invest in ULIP's, investment is being done after taking charges only.
Shivakumar-Let us do for the 15 years also. What will be return trade off one need to generate to get the decent return of around 8%? Now about ULIPs expenses, do you mean to say that in traditional plans if someone is investing Rs.100 then they first invest that Rs.100 and after generating return LIC will deduct the expenses? Please clarify...
I do not understand the logic behind knowing agents commission. People are getting the required product. Agents are not charging anything other than LIC premiums. LIC is paying the commission and customers are getting receipt for full amount. LIC Agents are not charging anything like CFP's do for investments.
And LIC Agents are giving Life long service whereas whenever market falls you have to search your investments made in market
Shivakumar-It is the right of every investor to understand the expense ratio the product involves. If one is comfortable with the expense ratio what traditional policies have and the return part then I don't have any issue to let them invest. Whether it is LIC agent's commission or CFPs charges, one must understand fully the positive and negative aspects of the product. Without knowing anything and blindly investing is the completely wrong thing. That is what I am saying here. Nothing more than that.
Brother next time you talk about any mutual fund or ulip plan pls first tell the fund managers and agents salary and commission , the peon salary in mutual fund d office. Than you will have right to say anything about LIC agents commission.
Ashvin-You don't know that from 1st April, 2016 all such expenses will be available in MF Account Statements (as per new SEBI rulings). Now happy?? :)
I think Dubey is right. One thing I don't understand why all ppl done their CFA link product with commission. and why some one should share the commission
Did you ever ask your CA or lawyer the profit he make from professional services her render ? or any restaurant that how much money he make when he serve you meal ? no because they are in profession to earn money.
So all agent in insurance also there to earn money , they don't do it to run charity organization.
Also check what are average commission one agent earn in a year for this how much he spend or traveling, servicing, presentation....... and if you make proper study just before stating big figure of 35% you will find how much in actual he earn
For your knowledge any good agent pay 20 to 30 % of his commission as a tax to government, plus professional tax, plus licance fees and lastly charges to attend training classes to update them or equip them with knowledge
I am sorry , but this is ongoing talk on major blogs created by many who are not in favour of insurance marketing and like to create issue on agency commission.
Bankim Thanks, if some one ask about a particular Insurance Plan then Few CERTIFIED FINANCIAL PLANNER will explain less about that plan and more about agent's earning. IF " A Doctor only give a advice and getting FEE for this , Can any one say that don't go for doctor because he will take your salary's 20% as fee and he will be a rich person by your20%.
Mr. Dubey,
It is just simple we need to built our self confident and create value of our knowledge and services. My client never ask me any clarification regard to how much i earn , because they belive in me.
As regard to all other who just promote mutual fund with term insurance it is very good combination, but then what will be situation in long run, did investor really follow the system to invest at both product year after year? No my most client don't follow the system.
In fact in most case when stock market is not performing well , they just skip their investment as well as their regular tendency is find value of investment how much it grow and change their fund regular base
So my experience says in most case LIC traditional plan always work better.
Once thing many time you can't count return on investment. If you take gold it was most poor investment in past but we invested because it is most safe. yes, it pays well in past few year so now every person talk for gold investment , but now look present condition.
Well we can discuss more in this issue so better we don't talk more and close the chapter
Better we educated our self by exchanging knowledge and in this regard Mr Basavraj is doing good job and i am really benefits from all his blogs.
So Mr. Basavraj please post more and more good article and we will always love to update our knowledge.
Dear readers-Below are few findings what Bankim's comment expressed.
1) While buying any financial product if you knowingly or unknowingly not ask for the expenses attached to that product then your agent will feel that you are not asking because you have faith on him. So he will not feel his obligatory to share that information with you.
2) It is a very complicated thing and a cumbersome product combo called "Term Insurance+Mutual Fund" and difficult to follow in the long run.
3) So the solution is only LIC, no other product can give you such a safety.
4) Your all financial decision must not always count for return part. So sometime don't think about return what you get from the investment and investing heartly is also good for you.
Thanks for this health and wonderful discussion Mr.Bankim and Mr.Dubey. Hope you enjoy my future readings and will love such healthy discussion in future too. I too ending this discussion here itself :)
Dubey-If you are an agent then will you not share the features which include expenses part also? If you are an investor and while looking at plan you are going to invest, you will not look into cost effective factor with other features like the return expectation and how this particular plan fulfills your financial dreams? Hope readers of these comments will enlighten the way discussion is heading :)
Bankin-What you thought about me is entirely a wrong way. I never told that earning higher or lower commission in any profession is wrong. But at the same time if one's hard earned money's major investment goes towards this service part then what will be his earnings from this investment? Suppose one is investing in insurance Rs.100 then 35% of his money goes towards lone agent's commission then what will be his future returns from this investment?
Now regarding expenses one bear on after sales and educational aspect, it is the need of the hour and to be in the market you need to do, either you are an insurance agent, mutual fund agent or Financial Planner. So matching that to this huge expense is entirely a wrong concept. Think purely from a client perspective. Suppose today I am investing Rs.100 then I have right to ask where my money goes (when you visit a restaurant if you satisfy with the price and the quality then you will never ask the difference he makes) and how much I get back. Am I not have right? He may be my insurance agent, mutual fund agent, CA, Lawyer or Financial Planner we need to be cautious when we are investor. That is what I pointed. If one is satisfied with the expenses on the product he is buying and at the same time satisfied with the return part then he have right to buy. But making aware about the facts is the job we mediator need to do.
you are 100% right,this will be helpful for more needful members,
for LIC Whole Life Plan and other magic PLAN with higher return Save Tax Save Money, please Call on 9716618942 ,Door Step Service also Available
Arvind-Thanks for your comment. But for your information the products you are mentioning are the worst when you simply sell without considering the investor portfolio. So don't say they are best solution for all persons need. Magic Plans?? I am about to write the review on these plans in coming days. Please wait till that period. Also I think you are placing the comments to get some clients from this platform instead sharing your knowledge. Hence your remaining comments will be deleted. Sorry to say this because this platform is meant for knowledge sharing but not for your business development.
Mr.Basavaraj Tonagatti
"you are 100% right,this will be helpful for more needful members,
for LIC Whole Life Plan and other magic PLAN with higher return Save Tax Save Money, please Call on 9716618942 ,Door Step Service also Available"
Where is product name? in my comment , i am saying just your coment "BasuNivesh says: August 25, 2012 at 9:46 AM" in other word, and for your information i don't want any clients by your blog i am just want to help him abut LIC, like you u r helping all of them, so don't take otherwise
Mdubet2007-Higher returns from whole life and magic plans?? Please dont claim false returns, especially on this platform. Can share me the details if you are confident about higher returns from these?
When you are commenting or helping others then never use tag lines "please call....for door step service" :) It shows what i wrote in my above comment. Why can't you share or comment like others...if they are attractive with your knowledge then they only ask for your details.
"if they are attractive with your knowledge then they only ask for your details"
yes u r right , but how you say "Please dont claim false returns" where is false return amount ? i have not committed any amount then how you say like this "FALSE"
"LIC Whole Life Plan and other magic PLAN with higher return Save Tax Save Money, please Call on...." this what is your claim of higher return. Can you answer for those five questions?
“LIC Whole Life Plan and other magic PLAN with higher return Save Tax Save Money, what is FALSE in this line
Higher returns than which products????
i recommend this product but they feel at eighty who live. they not recommending also.
Hariprasad-Inform them about the increase in life expectancy ratio of Indian population over the few years. It will show increase in life expectancy. Even if they not live upto the age of 80 yrs too, they will get good bonus compare to other traditional plans.