Life Insurance Corporation of India (LIC) has launched a New Single Premium plan called as ‘LIC Jeevan Utkarsh‘. This new plan from LIC is a traditional, Non-linked, with-profits, savings cum protection plan. The risk cover under Jeevan Utkarsh is ten times of tabular single premium amount. This plan will be available for sale from 06/09/2017 up to 31/03/2018.
What is a Single Premium Plan? – It is the insurance policy where you pay insurance only in the first year but continue to enjoy the life cover and other plan related benefits throughout the term of the policy.
Basic Features of LIC Jeevan Utkarsh
Below are the main eligibility conditions to buy LIC’s new single premium policy – Jeevan Utkarsh
- Minimum entry age : 6 years
- Maximum entry age : 47 years
- Minimum Sum Assured : Rs 75,000
- Maximum Sum Assured : No Limit (If the Sum Assured under a policy is below Rs. 3,00,000, the Sum Assured shall be in multiples of Rs. 5,000 & if the Sum Assured under this policy is Rs. 3,00,000 and above, the sum Assured has to be in multiples of Rs. 20,000.)
- Premium payment mode : Single Premium (one-time lump sum payment)
- Policy Term : 12 years
- Optional Riders : Accidental Death & Disability riders (additional premium is payable)
Benefits under LIC’s New Single Premium plan 2017 – Jeevan Utkarsh Policy
Death Benefits under LIC Jeevan Utkarsh ;
- On death before the commencement of risk : Refund of Single Premium without interest. Single Premium mentioned above shall not include any taxes, extra premium chargeable under the policy due to underwriting decision and rider premium, if any. (Life assured aged 8 or more, risk will commence immediately.)
- On death after the of commencement of risk : “Sum Assured on Death” shall be payable.
- On death before completion of Five policy years – The policyholder’s nominee would receive ‘Sum assured on death’ as death benefit.
- On death after completion of five policy years but before the Date of Maturity : “Sum Assured on Death” equal to 10 times the Tabular Single Premium along with Loyalty Addition, if any, shall be payable.
- Where “Sum Assured on Death” is defined as the highest of ;
- 125% of the single premium; or
- Guaranteed Sum Assured on Maturity i.e. Basic Sum Assured ; or
- “Absolute amount assured to be paid on death” i.e. 10 times of Tabular Single Premium
- Where “Sum Assured on Death” is defined as the highest of ;
Maturity Benefits under LIC Jeevan Utkarsh Policy – If the Life Assured surviving to the end of the policy term, “Sum Assured on Maturity” along with Loyalty Addition (LA), if any, will be payable. Where “Sum Assured on Maturity” is equal to Basic Sum Assured.
Surrender Value under Jeevan Utkarsh policy – The Guaranteed Surrender Value shall be as under ;
- First year: 70% of the Single premium.
- Thereafter: 90% of the Single premium
- If the policy is surrendered after completion of five policy years, Loyalty Addition, if any, shall be payable..
New Settlement option under LIC Jeevan Utkarsh
Under Jeevan Utkarsh, a new feature called ‘Settlement Option‘ is available. Below are some of the important points related to this option ;
- The policyholder can receive the settlement amount, it can be either death or maturity benefit, in installments over the chosen periods like 5 years, 10 years or 15 years (or) in the form of one-time lump sum payment.
- The installment modes can be as monthly (Minimum Rs.5,000), Quarterly (Minimum Rs 15,000), Half-Yearly (Rs 25,000) or yearly (Minimum Rs 50,000).
- If the installment amounts are below the threshold limits, then the death/maturity amount will be settled as lump sum payment only.
- Death Claim & Settlement Option – The policyholder can opt for either installment payment or lump sum payment during the policy tenure. The nominee would receive the payments (death claim) accordingly.
- Maturity Claim & Settlement Option – The policyholder can inform the insurer (LIC) about his choice, atleast 3 months before the maturity date. He/she would receive the maturity claim amount accordingly (either in installments or as lump sum payment).
Illustration of LIC Jeevan Utkarsh Plan
Let’s consider an example – Policy holder’s current age is 30 years (male), buys this policy for Sum Assured of Rs 5 Lakh and pays single premium amount of Rs 2.8 Lakh. The policy term is for 12 years.
In case, policy holder expires during the policy term, within 5 years from the date of purchasing the policy then death benefit ie Basic Sum Assured on death (10 times of single premium amount) is payable to his nominee.
If death occurs between 5 years and before the maturity date (12 years), death benefit (Basic Sum Assured + Loyalty Additions) is payable to the nominee. (Basic sum assured = 10 times of single premium amount)
Death Benefit under this plan = 10 times of tabular premium amount ie Single premium amount – Service Tax.
In this example, for Sum Assured of Rs 5 Lakh, the premium amount is Rs 2,80,243. Out of this, Rs 2,68,175 is tabular base premium and Rs 12,068 is Service Tax.
So, death benefit = 10 times of tabular single premium = 10 * Rs 2,68,175 = Rs 26,81,750.
In case, the policy holder survives till the maturity of policy, maturity benefit (SA + LA) is payable to him/her. (Here, SA is not equal to 10 times of single premium but it is normal Sum Assured ie Rs 5 Lakh in our example).
LIC Jeevan Akarsh Plan & Calculation of Returns on maturity
Below is the IRR (return on investment) calculation on LIC Jeevan Utkarsh scheme.
The above calculation is for sum assured of Rs 5 Lakh, tenure is 12 years, for a 30 year old male and no optional riders have been chosen. I have assumed Loyalty Additions @ of Rs 300 per Rs 1,000 Sum Assured. (Related Article : ‘Latest LIC Bonus Rates 2017-18‘).
With the above assumptions, the returns on Jeevan Utkarsh can be around 7 to 8%. Kindly note that returns are highly dependent on the LA rate only.
If you consider LA @ Rs 200 per sum assured then returns would be around 6.55%. In case, you consider LA @ 400, returns would be around 7.93%.
My Opinion on LIC’s Jeevan Utkarsh
You may kindly ponder over below points before buying this new LIC policy ;
- No Simple Reversionary Bonuses : There are no simple and annual bonuses under Jeevan Utkarsh Plan. Loyalty Additions alone are paid on policy maturity / on death after 5 years of taking the policy.
- Tax Benefit: As this is a single premium plan, kindly note that you can claim premium of up to Rs 1.5 Lakh only u/s 80c, for the Financial year in which you buy this policy. For example, if you buy an insurance policy for premium of Rs 3 lakh, you can claim only Rs 1.5 lakh as the benefit under section 80c in that financial year.
- Fixed Term : You do not have an option to pick a policy tenure of your choice. The policy term is fixed under this plan.
- Lump sum investment : You are investing a lump sum amount as single premium, so it always advisable to evaluate the opportunity cost of the money you are willing to invest, as there could be alternative investment options available which may benefit you more.
- Life Insurance cover : If your requirement is to get adequate life cover at affordable premium rate, consider buying a term life insurance plan. (Read : ‘Best Term Insurance plans‘).
- As explained in the above illustration, to get around Rs 26 lakh as life cover as death benefit, the premium amount of Rs 2,80,243 (one-time) has to be paid by the policy holder.
- If the same policyholder opts for LIC’s e-Term plan, to get Rs 27 Lakh life cover as death benefit, the premium amount of just Rs 3,600 per annum for 12 years is to be paid, that’s a total of just Rs 43,200 for 12 years (Rs 3,600 * 12 years).
- Returns : As explained in the above calculation table, the returns are primarily dependent on Loyalty Additions. Do note that LA can be dependent on the quantum of Sum Assured and tenure (death benefit / maturity benefit). The higher the LA amount, the higher the returns you get and vice versa. You need to wait till policy maturity date, to know the exact returns that you get from this plan. Though the returns on this policy seem to be decent, I believe that long term savings option like PPF (Public Provident Fund) can be a better choice, as the returns are known up-front (periodically). In case, you would like to take risk then there are plethora of investments options available. Ex : ELSS Tax saving mutual funds, balanced equity oriented funds, equity funds, Debt funds etc., (Related Article : ‘List of Best Investment Options‘)
Continue reading ;
- Why not to invest in LIC Jeevan Shanti Plan? | New Single Premium Guaranteed Pension Plan
- LIC New Plans 2019-2020 | Features, Snapshot & Review of all the Plans
- Traditional Life insurance plan – a terrible Investment option?
- Is buying a Term Life insurance plan a waste of your money?
- If Life is UNPREDICTABLE, insurance can’t be optional!
(Post published on : 02-September-2017) (This article is based on limited available information, if required, the above details can be edited/updated soon….)