LIC JEEVAN LAKSHYA – New Plan – Features, Review & Returns Calculation

LIC Jeevan Lakshya is a new plan introduced (in March 2015) by Life Insurance Corporation of India (LIC of India). Jeevan Lakshya plan is a Limited Premium Payment policy. It is a traditional endowment assurance plan.

The main feature of this new plan is, the payment of premiums is limited to a term shorter than the policy term. LIC Jeevan Lakshya Policy provides Annual Income Benefit to the nominee. In case of unfortunate event of death of policy holder, 10% of sum assured will be paid on every policy anniversary till the policy maturity. Also, a lump sum amount will be payable at the time of maturity irrespective of survival of policy holder.

Features of LIC Jeevan Lakshya Plan

• Minimum Entry Age : 18 years
• Maximum Entry Age : 50 years
• Minimum Policy Term : 13 years
• Maximum Policy Term : 25 years
• Premium Paying Term (PPT) : Policy Term – 3 years
• Minimum Basic Sum Assured : Rs 1 Lakh
• Maximum Basic um Assured : No limit
• Maximum maturity age : 65 years (policy-holder)

LIC Jeevan Lakshya – Optional Policy Riders

• LIC Accidental Death and Disability Benefit Rider : This rider can be opted at any time within the Premium Paying Term (PPT) of the Basic Plan. The benefit cover under this rider shall be available during the policy term. In Case of death during the policy term, an Amount equal to the “Accident Benefit Sum Assured” will be payable to the nominee.  In case of accidental permanent disability, an Accident Benefit Sum Assured will be paid in the form of dividing the amount into equal monthly installments spread over 10 years and all the future premiums for Accident Benefit rider are waived off. The maximum sum assured offered under this rider is Rs 1 crore (subject to the limit of Basic Sum Assured).
• LIC New Term Assurance Rider: This rider is available only at the time of taking the policy. The maximum sum assured offered under this rider is Rs 25 Lakh.
  

Death Benefit & Maturity / Survival Benefit under LIC Jeevan Lakshya Policy

• Death Benefit :
  • If Death Occurs during the policy term 10% of the basic sum Assured (as annual income benefit) will be paid to the nominee every year from the year of death till the date of policy maturity.
  • At the end of the policy term/ maturity date, nominee will be paid  Sum Assured on death (110% of sum assured) + Vested simple Revisionary Bonuses + Final Additional Bonus (If Any).
• Maturity Benefit : On survival of the policy holder till the end of the policy term, Maturity Amount = Sum Assured + vested Simple Revisionary bonuses + Final Additional bonus  (FAB – if any) will be paid to the policyholder.
  

Illustration (example) of LIC Jeevan Lakshya Plan

Mr.Pandey (25 years)  purchases LIC Jeevan Lakshya Policy with a Sum Assured of Rs 10 Lakh . He opts for 20 years as the policy term and the premium paying term is 17 years (20-3 years).

Death Benefit in Pandey’s case : If Mr Pandey passes away after 5 years from the date of policy purchase, the death benefit payable to his nominee will be;

• From 6^th year to 20^th year, nominee will be paid with sum of 1 Lac every year. (10% of basic sum assured)
• At the end of the policy term after 20 years, nominee will receive 11 Lac (110% of sum assured) + Accrued Bonuses + FAB (Final Additional Bonus, if any)

Maturity Benefit : Suppose if Mr.Pandey survives till the policy term maturity, the maturity benefit payable to him will be:-

• Maturity amount = 10 Lac + Bonus + Final Additional Bonus (if any)

LIC New Plan – Jeevan Lakshya Policy – Returns Calculation

I have calculated the returns using IRR (Internal Rate of Return) function of MS Excel. In the above example, policy duration is 25 years and the Premium Payment Term is 22 years (25-3 years). At the beginning of 26th year (policy maturity), the policy holder will get around Rs 2.42 Lakh. I have assumed Rs 45 per Rs 1000 Sum assured as Yearly bonus and Rs 300 as Final Additional Bonus.

So, the expected returns from LIC Jeevan Lakshya can be around 6%.

My Opinion on LIC Jeevan Lakshya Plan

Should you buy LIC Jeevan Lakshya policy? Is this a good plan?

Generally, the returns from ‘Limited Premium Payment Endowment Plans’  can be somewhere in the range of 5.5% to 7 %, which does not help in funding long-term goals. The returns are very much dependent on the bonus rates ( Simple Reversionary and Final Additional Bonuses) that LIC declares every year.

Kindly stay away from these kind of plans if you are expecting higher Rate of Returns. Do not buy this plan just because it offers you Tax Saving benefits. There are better Tax Saving Investment options available in the market. For example, PPF (Public Provident Fund) will give you better returns than these kind of Endowment Plans (if  safety of capital and tax benefits are your priority).

(Kindly read my articles – “Is Term insurance plan a waste of your money?” & “Top 7 Best Online Term Insurance Plans“)

Kindly be aware of the financial products that you buy. Let me know your views on LIC Jeevan Lakshya plan. Do share your comments. Cheers!

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