Many of us trapped in typical endowment life insurance plan. But finding it hard to calculate LIC policies maturity amount on our own. Let us simplify this.
Long back, I wrote a post “LIC Policies-How to calculate returns?“. In that post, I explained about the meaning of bonus, Guaranteed Addition, Loyalty Addition and Final Additional Bonus. I also explained about how to consider and calculate each part.
But I felt that many readers not able to understand how to arrive at return % from this investment (sorry to say so as an investment for insurance product). Hence, thought to write purely on how to calculate the return from your typical traditional life insurance products.
Here I am using the Excel tool to calculate the returns. The function what I will use is IRR (Internal Rate of Return).
What is IRR (Internal Rate of Return)?
I will not use those confusing financial words. Instead, you can say that it is the excel sheet function used to calculate the return on your investment when you make some investments in periodic ways. For example, you pay an insurance premium regularly (either yearly, half-yearly, quarterly or monthly) and at the end, you receive the amount from an insurance company.
How to calculate IRR using excel sheet?
I created a video of how to calculate IRR using excel sheet. In this video, I took all probable types of all endowment plans. I took the examples of the regular premium endowment plan, limited premium endowment plan, single premium endowment plan and money back plans.
You notice in this video that even though I considered higher bonus rate i.e. Rs.50 per Rs.1, 000 Sum Assured per year, still the return of such products not crossed 7.5%.
It is too simple to calculate the return on your own. If you already bought the endowment products, then look at last year bonus rate for your policy and can consider the same bonus rate and final additional rates to arrive at final maturity value or return.
However, if you are planning to buy a new product, then don’t rely on the life insurance agent’s claim. Instead, cross check the bonus of that particular product and then using the above video, you can calculate the expected return from your investment.
If there is no historical bonus rates for your plan (this happens when the plan is new), then in my view, it is wise to consider the bonus rate of Rs.50 per Rs.1, 000 sum assured per year.
Remember that your agent may alter the bonus rates (at the higher end) and may show you the return, which may force you to invest in such products. But never rely on agent’s claim. Instead, visit LIC portal or my earlier post on bonus rates “LIC’s Bonus rates for 2015-16 and Comparison” and do the calculation on your own.
Buy such products only, if you fully convinced about the life insurance offered and returns in such products. Blindly investing for the sake of tax saving, forced selling by agents or simply considering such products as best may actually harm you in the long run.
I am also sharing the excel sheet which I used in this video tutorial for your reference. Let me know if you still feel difficulty in the calculation.
Hope this post will answer to many of those endowment plan buyers or already bought individuals concerns of calculate LIC policies maturity amount.
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View Comments
Dear Mr Tonagatti,Thanks a lot for helping us to take decision.But Sir before helping others You should know first.I think You have not gone through LIC Products and features properly.I watch your IRR calculation of Money back policy where you enter the Premium for continuous 20 Yrs which is Actually 15 Yrs PPT..However Thanks for helping us.
Dear Rafique,
I am not following the product which you may be thinking of (limited premium payment). For generic understanding, I took the illustration.
Jeevan Shri (Plan 112)
SA-Rs.5,00,000
Premium payment term-16 years
Policy maturity period-25 years
I already paid 16 years of premium on time which ended in 2017, will there be final additional bonus to this policy with the maturity amount at the end of 25th year. I'm out of the country currently and I couldn't find details about this policy as its discontinued. This was sold to my parents who paid the premium for first two years. Can you plz help me by explaining the maturity amount? Some say FAB will be added to maturity and some say the final amount will not have FAB.
Thank you!
Dear Lakshmi,
This plan does not offer any FAB. If you have doubt, then check THIS LINK OF LIC for the same. Also, FAB is not a huge differentiating factor in such policies. It hardly changes your returns.
Hello Sir
I have two LIC Policies as Jeevan Anand (Plan-49) and yearly premium is Rs. 13026 for both and I had already paid it for 10 years. but Premium paying term for both is 21 years, So how much I will get If I surrender it now. LIC customer portal showing vested bonus for both policies as 1,09250. So can you please tell if I will get the at least amount which I paid.
Monika-Contact the LIC Branch to enquire the same.
I have a Jeevan saral (165) Plan.
My Death Sum Assured =7.50.000/-.
age at entry=21
policy term=25
yearly premium paid=36030/-
Could you please help me calculating the maturity value on 2037 at the time of maturity?
Shreyasi-Refer my post "LIC’s Jeevan Saral-Why so much confusion?".
Hi,
I have seen your you tube video and read this article as well . Its really a great job you are doing. Congratulations !!!
I am really confused about three of my LIC policies. I don't need the insurance coverage as I already have a term plan; I bought all these policies before I bought the term plan. So now I am confused about which is a financially savvy solution among these three :
(1) Continue and take the maturity amount at maturity
(2) Discontinue the premiums and take the paid-up amount at maturity
(3) Surrender and take the surrender value and invest in good MF
The details of my three policies are :
(1) Jeevan Chaya(103) Bought in 2002 Premium 24393 Sum Assured 4lakhs Policy term 18 years Premiums paid 15
(2)Jeevan Chaya(103) Bought in 2003 Premium 24568 Sum Assured 4lakhs Policy term 18 years Premiums paid 15
(3) Jeevan Anand(149) Bought in 2004 Premium 28156 Sum Assured 5lakhs Policy term 20 years Premiums paid 13
As I said, the only reason of my investments is financial returns which I get (i am covered thru term plan). Since one of my kid is in college and other would be in college in another 1.5 years, I really need good money.
Thanks in advance for your help.
Vinita-As the all three plans about to mature, I suggest you to turn the policies to paid up than surrender.
Thanks a lot for such a prompt resply.
Even I was thinking that (barring Jeevan Anand , because I still need to wait for 7 years - but you suggest that I shouldn't surrender that as well, right ?).
However my confusion started when i visited LIC office yesterday and the lady there suggested that instead of paid-up , I should rather surrender my policies. So I am wondering, is it beneficial for LIC that the policies are surrendered rather than paid-up ? Thats why she suggested that ?
Thanks again for helping me with this decision - really appreciate a lot.
Vinita-The concerned Official might have suggested you with intention of selling one more NEW policy from the surrender amount (the usual tactic they follow) :)
Hi Sir
I am confused with the investment or the policy which I have taken in JAN 2017 with some wrong guidance or cheating from agent
He told it will increase I will get very good amount at maturity, its purely my falut and was going through your blogs which is very well explained
Below is my policy which is not the one which I asked the agent
HDFC Sampoorn Samridhi Plus
Sum Assured: INR 13,30,000
The policy paying term is 16 years and maturity is 21 years
I am paying 9406 ( 9000 premium + 406 tax) per month , paid for one year
Could you please suggest me if I should allow this lapse as I see if I calculate I will be getting very less
the maturity benefits are
SA
Guarnteed additions of 5% per SA for first 5 years
Reversionary bonus -
so Should I allow it to lapse or make it paid up polciy
Please help
BR
Venkat
Venkat-To be eligible for surrender or paid up, the policy must be continued at least for 3 years. Hence, take your call based on your loss consuming capacity.
Thank you sir for quick response
I mean my question is as the policy is only one year old , is it better to lapse or make it paid up or pay for whole term
I mean is it better to invest the rest of 15 years policy somewhere else , any guess how much will be maturity for this kind of policy
as I see the gura
SA 1330000
GA 265780
Reversionary bonus 1255814 ( assuming 4.5 % for 21 years ) and
the total of above all three is 2851594 ( roundign to 29 lakhs ) - in year 2038
I assume they may give some terminal bonus but I doubt after reading different blogs
so is it worth continue or lapse it and use the rest 15 years policy payment in some good investment
sorry for asking the detailed question , as I was in need of some advise on this so I have asked
BR
Venkat
Venkat-It is a crap product sold to you. Hence, in my view better to come out at the earliest.
Thank you Basavaraj for your reply
I was also thinking to come out i.e. to lapse and invest the same in good MFs ]
Luckily I paid only one year out of 16 years total payment years and lucky to see your blogs on financial knowledge
your blog is really helping many people .
BR
Venkat
Sir, what will happen if FAB is not declared on policy`s maturity year?
Dhana-YOU CAN"T QUESTION and accept it of whatever they give. Because they clearly mention that IF DECLARED.
Jeevan Surabhi table 107, term 20, premium fully paid sum assured 50000, date of maturity Feb 2018,what is maturity amount
Tarun-Refer above post and calculate.
New endowment plan
Sum assured-1000000
Term-17yr
Maturity- after completing ppterm
What will bi the expected maturity amount
Dibesh-Please refer the video and you can calculate on your own.
Hi Basavaraj,
First of all thanks for this video after 10 years of paying premium today only learnt how to calculate returns for LIC policy.
Please clarify this, For example i paid the premium up to 10 years for 21 year term and leave it till maturity.
At the end of the maturity period will Bonus and Final Additional Bonus will be added for returns?
Sum assured will be reduced according to the number of premiums paid right? how to calculate the sum assured in this case?
Based on your video to calculate the IRR for my scenario do i need to fill in the premium in negative values upto 10 years only and make the remaining years zero?
Which is best surrender or leave it till maturity or continue paying premium? As per the IRR calculated with highest bonus i am getting 6.75% returns for my policies. Kindly advise.
Thank you.
Keynes-Once you stop the premium, then the policy will turn to be paid up with reduced sum assured. The policy will not earn any further bonus (from the date it turn to paid up policy). But it will be payable at maturity or death of life assured (during policy period). Hence, take a decision based on the difference between surrender and paid up value and also the remaining period left.
"Based on your video to calculate the IRR for my scenario do i need to fill in the premium in negative values upto 10 years only and make the remaining years zero?"-YES.
Better to turn paid up as in your case you almost paid for the half of the policy period.
Thank you very much for your answers