LIC Jeevan Pragati Plan (Table No.838) – Features, Review & Returns Calculation

LIC (Life Insurance Corporation of India) has launched a new Endowment plan called LIC Jeevan Pragati (Plan no 838). This plan is available for purchase from 3rd February, 2016 onwards. This new endowment assurance plan is a non-linked, with-profits and savings cum protection plan.

The main feature of this Jeevan Pragathi plan is the ‘sum assured on death’ (part of death benefit) automatically increases after every five years during the term of the policy.

LIC’s New Plans in 2016

LIC of India has already launched two new schemes in 2016;

• LIC Jeevan Labh – New Endowment Plan : This plan has been launched on 4th January, 2016. Click here to read detailed review on Jeevan Labh.
• LIC Jeevan Shikhar Plan : This is a single premium endowment plan and has been launched on 11th January, 2016. Click here to read detailed review on Jeevan Shikhar plan.

So, LIC’s Jeevan Pragati would be the third new plan of LIC for the year 2016.

Key Features & Eligibility Conditions of LIC Jeevan Pragati Plan

The main features of this new endowment plan are as below;

• Minimum Basic Sum Assured (payable on maturity) : Rs. 1,50,000/-
• Maximum Basic Sum Assured : No Limit (Maturity Sum Assured shall be in multiple of Rs. 10,000/- only)
• Minimum Policy Term : 12 years
• Maximum Policy Term  : 20 years
• Minimum Age at entry for Life Assured : 12 years (completed)
• Maximum Entry Age : 45 years (nearer birthday)
• Maximum Age at Maturity for Life Assured : 65 years
• Premium payment mode : Yearly, half-yearly, quarterly & monthly.
• Accidental Death & Disability Benefit Rider is available on payment of additional premium.
  • Minimum Accident Benefit Sum Assured is Rs 10,000
  • Maximum Accident Benefit Sum Assured is an amount equal to the Basic Sum Assured subject to the maximum of Rs 1 cr.
  • Minimum entry age for the rider is 18 years.
• Agent’s commission for policy term 12 to 14 years is 20% in first year and 7.5% in 2nd & 3rd year. The first year agents’ commission would be 25% on a 15 year policy term.

Benefits under LIC’s Jeevan Pragati policy

• Death Benefit under Jeevan Pragati Plan : On death of the Life Assured during the policy term, the Death Benefit  which is ‘Sum Assured on Death’ + Vested Simple Reversionary Bonuses + Final additional bonus, if any, shall be payable to the nominee. The Sum assured on death automatically increases every five years. Where “Sum Assured on Death” is defined as the higher of  a) 10 times of annualized premium (or) b) Absolute amount assured to be paid on death, which is as under;

i) During the first five policy years : 100% of the Basic Sum Assured.

ii) During 6th to 10th policy years : 125% of the Basic Sum Assured.

iii) During 11th to 15th policy years : 150% of the Basic Sum Assured.

iv) During 16th to 20th policy years : 200% of the Basic Sum Assured.

• Maturity Benefit payable under LIC Jeevan Pragati Policy : On survival to the end of the policy term, the maturity benefit which is ‘Sum Assured on Maturity’ + Simple Reversionary Bonuses + Final Additional bonus (FAB) if any, shall be payable to the policy holder. Sum Assured on Maturity is equal to Basic Sum Assured.
• Final Additional Bonus is not payable on PAID-UP policies.
• The date of commencement of risk under Jeevan Pragati plan will be immediately from the date of issuance of policy.

Illustration of LIC Jeevan Pragati Plan

Mr. Bhandari (30 years)  purchases LIC Jeevan Pragati insurance policy with a Sum Assured of Rs 10 Lakh . He opts for 20 years as the policy term.

Death Benefit in Bhandari’s case : If Mr Bhandari passes away, the Death Benefit  which is the total of ‘Sum Assured on Death‘ + Vested Simple Reversionary Bonuses + Final additional bonus, if any, shall be payable to the nominee.

The risk cover (Sum assured on Death) depends on the completed no of policy years. Absolute amount assured to be paid on death, will be as below;

i) During the first five policy years : 100% of the Basic Sum Assured.

ii) During 6th to 10th policy years : 125% of the Basic Sum Assured.

iii) During 11th to 15th policy years : 150% of the Basic Sum Assured.

iv) During 16th to 20th policy years : 200% of the Basic Sum Assured.

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

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

LIC Jeevan Pragathi Plan & Calculation of Returns on maturity 

I have calculated the returns on maturity using IRR (Internal Rate of Return) function of MS Excel. In the above example, policy duration is 20 years . At the beginning of 21st year (policy maturity), the policy holder will get around Rs 3.36 Lakh. I have assumed Rs 42 per Rs 1000 Sum assured as Yearly bonus and Rs 400 as Final Additional Bonus (FAB). The FAB depends on the quantum of sum assured and the policy tenure.

So, the expected returns from LIC Jeevan Pragati insurance plan can be in the range of 6% to 7%.

My Opinion on LIC’s Jeevan Pragati Plan

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

Generally, the returns from ‘Endowment Plans’  can be somewhere in the range of 5% to 7 %, which does not help in achieving your long-term goals, considering the prevailing rate of inflation in a growing economy like ours . 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 under Section 80c. There are better Tax Saving Investment options available in the market. For example, PPF (Public Provident Fund) will can offer you better returns than these kind of Endowment Plans (if  safety of capital and tax benefits are your priority). You may read my article on Term insurance Vs Endowment plans to get more idea about the importance of having adequate life cover and why Small Savings Scheme like PPF can be a better option than traditional life insurance plans (such as money-back / endowment plan).

I am sure this plan will be aggressively promoted based on ‘increasing risk cover’ feature. If your objective is to get life cover, consider buying a term plan and review your risk cover requirements based on your changing economic profile. You may also consider Term plans like ICICI’s iProtect Smart Term Insurance plan (or) SBI Life’s e-Shield term plan which offer increasing life cover options at key stages of your life.

(Kindly note that this post is based on the limited information that is available on net. The above details can be changed.)

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