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 :
- LIC New Plans 2019-2020 | Features, Snapshot & Review of all the Plans
- If life is unpredictable, Insurance can’t be optional!
- Term Insurance plan : Is it just a waste of your money?
- Traditional Life insurance plan : a terrible investment option?
(Post first published on : 13-May-2017)
This post was last modified on July 11, 2023 6:37 pm
View Comments
So, if one takes these kind of traditional life insurance policies, how does it benefit if unfortunately a person meets with an accident and is permanently disabled?? (assuming a person goes for only Base policy without any riders).
Say the Sum assured is Rs 50 lacs the policy holder premium will get stop plus he will get Rs 50 Lacs in equal installments in 120 months i.e. 41000 every monthly. plus he will get maturity as usual if the policy attains maturity term and policy holder ia alive.
Disability benefit is always inclusive in the premium whereas sometimes pWB is extra.
Dear Jayesh,
Do you mean to say that Accident benefit rider and/or Disability benefit rider is always inclusive in base premium?
And what would be the approx premium for Rs 50 Lakhs for this policy for a healthy 30 year old male (for an ex)??
Lic knows very well their are some mind who are very pathetic to apply for term plans and forgets their old age."
Means : Some Humans feels during the period of earnings they should only apply for term plan whereas they don't there are other risk too such as accident injury and disability to work which can also make loss of earnings.
Dear Jayesh,
So, if one takes these kind of traditional life insurance policies, how does it benefit if unfortunately a person meets with an accident and is permanently disabled?? (assuming a person goes for only Base policy without any riders).
Sir, i want clarification regarding policy surrender value, for example if i take Rs/-1200000 sum assured, what will be the surrender value in 7th year?
U will get on surrender is Paid Premium Amount Plus 394000 as bonus
Jayesh 9323485795
Dear Rajesh ..You can get surrender value details on LIC website.
Why is LIC coming up with such pathetic and irrelevant products instead of promoting term plans?
Lic never comes any pathetic plans. Lic knows very well their are some mind who are very pathetic to apply for term plans and forgets their old age. Trust Jeevan Umang is a new feather to provide 8% tax free income till death with self desire maturity and minimum commitment of only 3 yrs to pay the premium for all benefits.
Dear Jayesh,
I dint get your point - "Lic knows very well their are some mind who are very pathetic to apply for term plans and forgets their old age."
Could you please re-phrase this for me??
Hello, Mr Reddy,
thanks for your views, just want make one point that IRR is considering 100 years, which is only in exceptional case, if some one die after 70 years then IRR may be around 8%, if you consider 100 years then obsessively IRR will be low.
SIR CAN YOU PLEASE CLARIFY REGARDING THE TAXABILITY OF THE SURVIVAL BENEFIT OF 8% EVEN AFTER THE POLICY MATURITY EVERYYEAR,
Dear Mr Joshi,
Money back amount received by you are tax free under section 10 (10) (d) as these are received by you as survival benefit from a life insurance policies, provided if your policy's sum assured is more than 10 times the annual premium.
im 32 years old and my boy child is 4years old. and i am saving only rs 2000.00/ month from my income from a small bussiness and i have'nt any policy not having any type of savings..
so you r requested to please suggest me the best way to save some money for either my future or my son future and my whole family in approx 15 years..
Please take a combination of Bima Diamond and Jeevan Umang Money back+Retirement
Jayesh 9323485795
Dear prasad,
Suggest you to kindly first take a Term insurance plan, personal accident cover and a Health insurance cover for family.
Kindly read this articles and you may revert to me..
Financial planning pyramid..
If life is unpredictable, insurance can't be optional!
the viability can be ascertained only after we get the prm rates
jeevan umang plan is a realy very excellent insurance plan. you can buy this plan as a pension plan also. you can plan the future of your children. marriage provision of a girl child and for higher education of children also.
Dear Avinash,
May I now how is it possible to plan for these goals? and what Cost?
Kindly share your views.
pls send your details
Keegan umang is going to be more attractive among public. Since the kind of benefits this plan offers can't match by one insurer.
1. Guaranteed 8% annual return on SA which is not even available in pension as scheme and the annual return is fully tax free
2. The insured also secured with life time insurance coverage
My advise is that this plan is more suitable for people who thinks about pension
Thanks,
Jagadeesh
Lic advisor 9710037371
This is reasonable argument. guarantee of 8% interest after 25-30 years on whatever you accumulate till then is a big risk for provider. No other institutions can match it. Those who criticize aren't considering decreasing rates of interest as a country develops. what you buy here is not returns to build corpus but guarantee on returns on corpus after a long duration of time. effective 5-6% I agree but that would be too good after 25 years.
Dear Asit,
Thank you for sharing your views!
1 - Interest rates can be cyclical. What if the rates increase and there are better alternatives over the next many years?
Have you accounted for inflation and raise of prices in a growing economy like India?
2 - All of us are aware of the fact that 'insurance penetration' is very low and average insurance cover per head is also low. So, the first priority for many Indians is to get adequate life cover at affordable rates through Term plan(s). And these kind of plans are surely not affordable to get adequate life cover.
3 - If one has to accumulate retirement corpus through a plan like this, what is the total cost involved to get decent accumulation (can be very high) and dont you think not investing in other better alternate avenues can itself is a big risk factor.
May I know your views on PPF Vs these kind of plans in terms of returns.
Hi Sreekanth
What are you other investment avenues in comparison to LIC Umang? PPF is different. Upon maturity you will have to close it and invest the corpus into a FD. The interest rate would be at best 5% and that too is taxable. Dont compare LIC with equity instruments.
Is there anything else that you think that is comparable and is equally good?
regards
Sri
Dear Sriram,
May I know, what do you mean by - 'PPF is different?'
PPF matures after 15 years, if an account is opened now. How can you predict interest rates on FDs are going to be around 5%, 15 years from now??
Why should not we compare with equity investments, when someone is investing for long-term?
By the by, LIC as an institution invests thousands of crores in Equities year on year!