LIC Jeevan Umang – New Whole Life Plan | Features, Illustration & Review

Life Insurance Corporation of India (LIC) has launched a New Whole-Life plan called as ‘LIC Jeevan Umang‘ on 16th May, 2017. This new plan from LIC is a traditional, Non-linked, with-profits, Whole Life Assurance and Limited Premium Payment Option plan.

What is ‘Whole-Life Insurance Plan’? –  It is a life insurance policy which is guaranteed to remain in force for the insured’s entire lifetime.  The Sum assured is paid to the Policyholder’s nominee in the event the insured dies.

The main feature of LIC’s New plan – Jeevan Umang  is it provides annual Survival Benefits from the end of the PPT (Premium Paying Term) till policy maturity and also pays lump sum amount at the time of maturity (or) on death of the policyholder (during the policy tenure).

In this post, let’s understand the key features & benefits of LIC Jeevan Umang Policy.

Key Features of LIC Jeevan Umang Whole Life Plan

Below are the main eligibility conditions to buy LIC’s new policy – Jeevan Umang;

• Minimum Age Entry : 90 days
• Maximum Age at Entry :
  • 55 years for 15 year premium period
  • 50 years for 20 year premium period
  • 45 years for 25 year premium period
  • 40 years for 30 year premium period
• Minimum age at the end of PPT : 30 years
• Maximum age at the end of PPT : 70 years
• Age at Policy maturity : 100 years
• Policy Term (Tenure) : 100 – age at entry. (For example : If a 30 year old individual buys LIC Jeevan Umang policy then the policy term would 100 years minus 30 years = 70 years.)
• PPT (Premium Paying Term options) : 15, 20, 25 & 30 years
• Minimum Basic Sum Assured : Rs 2 Lakh
• Maximum Basic Sum Assured : Not Applicable
• Optional available Riders : Accident Death Benefit & Disability Rider, New Term Assurance Rider & New Critical Illness Benefit Rider.

Benefits under LIC Jeevan Umang Policy

• Death Benefits under Jeevan Umang Plan ;
  • On death before the commencement of Risk: An amount equal to the total amount of premium/s paid without any interest shall be payable. (Life assured aged 8 or more, risk will commence immediately.)
  •  On death after the commencement of Risk: Death Benefit is defined as sum of “Sum Assured on Death” and vested simple reversionary bonuses and Final Additional Bonus, if any shall be payable to the Nominee. Where “Sum Assured on Death” is defined as the highest of ;
    • 10 times of annualized premium (or)
    • Sum assured on Maturity (or)
    •  Absolute amount assured to be paid on death ie Basic Sum Assured. (The death benefit will not be less than 105% of all the premiums paid as on date of Death.)
• Survival Benefits :
  • On the life assured surviving to the end of the premium paying term and all the premiums in policy have been paid, Guaranteed survival benefits at the rate of 8% of Sum Assured will be available annually after completion of the premium paying term till maturity or death which ever is earlier.
  • First survival benefit shall be paid at the end of the premium paying term and thereafter on completion of each subsequent year till life assured survives or policy anniversary prior to the date of maturity, whichever is earlier.
• Maturity Benefits under Jeevan Umang Plan : Maturity benefit = Basic Sum Assured + Simple Reversionary Bonuses + Final Additional Bonus (if any) shall be payable to policyholder on surviving to the end of the policy term.

Graphical Illustration of LIC Jeevan Umang Plan – How does this plan work?

I have tried to explain the features of Jeevan Umang Policy and how it works through the below info-graphic. (You may click on the image to open it in a new browser window.)

Let’s consider an example – Policy holder’s current age is 30 years (male), buys this policy for Sum Assured of Rs 10 Lakh and with Premium Paying Term as 25  years. So, the policy term would be for 70 years (100-30 years).

The policyholder has to pay premiums for 25 policy years (till he attains 55 years of age). After PPT ends, survival benefits @ 8% of Sum assured are payable till one year before policy maturity year. So, benefits are payable till policy holder attains 99 years. Maturity benefit is payable to policyholder when he attains 100 years (ie policy term completes, on 70th policy year).

In case, policy holder expires during the policy term then death benefit is payable to his nominee.

LIC Jeevan Umang & Returns Calculation

Below is the IRR (return on investment) calculation on Jeevan Umang policy. 

The above calculation is for sum assured of Rs 2 Lakh, PPT is 25 years, for a 30 year old male and no optional riders have been chosen. The premium of around Rs 7,879 is payable for 25 years. From 26th policy year onwards, survival benefit is payable. On surviving till 70th policy year end, the policy holder will get a maturity benefit of around Rs 18.9 Lakh.

I have assumed Final Additional Bonus of around Rs 3,550 per Rs 1,000 Sum Assured.

I have also assumed Simple Reversionary Bonus @ Rs 70 per Rs 1,000. I believe that this is on a higher side. If you observe the past bonus rates declared by LIC, Rs 70 has been the SRB on Whole Life plans. However, Jeevan Sugam can be considered as a combination of Whole life + Money back plan (as survival benefits are payable). So, LIC may or may not declare higher bonus rates on this plan when compared to their pure Whole-Life plans. (Read : ‘LIC’s latest Bonus Rates for 2016-17‘)

My Opinion on LIC’s new Whole-Life Plan – Jeevan Umang

• Is Life insurance cover required till 100 years? -It is not required. Ideally, as long as you have liabilities to take care of and as long as you have family members who are financially dependent, you need to have life insurance cover. Almost all of us would like to lead a debt free life and with no financial obligations during retirement age. So, I believe that having adequate Health insurance cover is a must for whole-life and same may not be the case with Life insurance cover.
• Adequate Life cover : You nee do to pay Rs 7,879 as premium for a Sum Assured of Rs 2 Lakh. If your priority is to get sufficient life cover at cheaper premium rates then you can buy a Term insurance plan. A 30 year policy holder (non-smoker) can buy an e-Term insurance policy from LIC itself with a life cover of Rs 50 Lakh by paying a premium of Rs 7,812 p.a. for 30 years. (Read : ‘Best Term Life Insurance plans‘)
• Investment Returns: If you would like to invest in this plan for decent Returns then you may be up for a disappointment. These kind of traditional plans can at best give you 5-6% returns. The returns are primarily dependent on the quantum of bonuses declared by LIC. Also, note that these bonus amounts are not paid to you immediately. They are accrued and paid on maturity or claim. Compounding is not done. If your investment objective is better returns then there are plenty of other investment options available in the market. (Read : ‘List of best investment options‘)
• Tax Savings : If your objective is tax saving cum better returns, you may consider investing in an ELSS mutual fund scheme. Even PPF (Public Provident Fund) can give your better returns than this policy and it is tax-efficient too. (Read: ‘Best ELSS Tax saving Mutual Fund Schemes‘)

Continue reading :

1. LIC New Plans 2019-2020 | Features, Snapshot & Review of all the Plans
2. If life is unpredictable, Insurance can’t be optional!
3. Term Insurance plan : Is it just a waste of your money?
4. Traditional Life insurance plan : a terrible investment option?

(Post first published on : 13-May-2017)