LIC Nav Jeevan Plan – Features & Review

LIC of India is proposing to launch its new life insurance plan called as LIC Nav Jeevan Plan in March, 2019.

Nav Jeevan plan is a non linked, with profit, Endowment Life Assurance plan. The main feature of this plan is that the policyholder has the option to choose between two premium payment options i.e., single premium (or) limited premium payment term of 5 years.

Before discussing about the features of LIC Nav Jeevan plan, let’s understand the different types of Traditional Life Insurance plans.

• What is an Endowment plan?  – It  is a combination of insurance and investment. The insured will get a lump sum along with bonuses (if any) on policy maturity (or) on death event. 
• What is an ‘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.
• What are Money-back policies? – They provides life coverage during the term of the policy and the maturity benefits are paid in installments by way of Survival Benefits (money-back payments).
• What are Limited Premium Payment Insurance Plans? – A limited premium payment plan is a plan where you pay the premium for a shorter span of time and enjoy the benefits of an insurance cover for a long time.
• 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.
• What is Term Life Insurance Plan? – Term insurance is the simplest and most fundamental insurance product. These insurance plans are designed to ensure that in the event of the policyholder’s death, the family gets the sum assured (the cover amount). Term plan provides risk coverage for a certain period of time (policy term/duration). If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid. It is the cheapest form of Life insurance in terms of premium.

Key Features of LIC Nav Jeevan Plan

Below are the key features of LIC’s Nav Jeevan Policy for Single Premium option;

• Minimum Age at entry : 90 days
• Maximum age at entry : 44 years
• Minimum basic sum assured (BSA) : Rs 1,00,000
• Maximum basic sum assured (BSA) : No Limit
• Policy term : 10 to 18 years
• Premium Payment Term : Single
• Surrender option: The Policy can be surrendered at any time during the policy term under single premium option.

Below are the key features of LIC’s Nav Jeevan Policy for Limited Premium Payment option;

• Minimum Age at entry : 90 days
• Maximum age at entry : 60 years
• Minimum basic sum assured (BSA) : Rs 1,00,000
• Maximum basic sum assured (BSA) : No Limit
• Policy term : 10 to 18 years
• Premium Payment Term : 5 years
• Surrender option: The Policy can be surrendered at any time after paying premium for two policy years.
• Quantum of Death benefit :
  • Under Limited Premium payment category a policy holder who is above 45 years of age have two options to choose from;
    • Option 1 – You can choose for 10 times of annualized premium as a death benefit.
    • Option 2 – You can choose for 7 times of annualized premium as a death benefit.

Benefits under LIC NavJeevan Plan

LIC Nav Jeevan – Maturity Benefit

When the policyholder survives till the end of the policy term and all the due premiums have already been paid ‘Sum Assured on Maturity’ along with LA (Loyalty Additions) if any are payable. (Sum Assured on Maturity is equal to Basic Sum Assured.)

LIC Nav Jeevan Policy – Death Benefit

In case life assured dies before the date of maturity and policy is in force condition then the benefits payable to nominee/assignee is as under;

• On death during the first five years: ‘Sum Assured on Death’ is payable
• On death after completion of five policy years but before the date of maturity: ‘Sum Assured on Death’ along with Loyalty Addition is any payable
  • For Single Premium Policy: ‘Sum Assured on Death’ is defined as the higher of  Guaranteed sum assured on maturity that is basic sum assured or absolute amount assured to be paid on death that is 10 times of tabular single Premium for the chosen basic sum assured.
  • For Limited Premium Policy: ‘Sum assured on death’ is defined as higher of guaranteed sum assured on maturity or absolute amount assured to be paid on death that is 10 times of annualized premium if OPTION 1 is opted for or 7 times of  annualized premium if OPTION 2 is opted for.

LIC Nav Jeevan Insurance Plan – Illustration

Navjeevan Policy – Single premium option – Illustration

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 around Rs 2.5 Lakh. The policy term is for 15 years.

In case, policy holder expires during the policy term, within 5 years from the date of purchasing the policy then death benefit ie Sum Assured on Death (10 times of single premium amount) is payable to his nominee.

If death occurs between 5th year and before the maturity date (15 years), death benefit (Sum Assured on Death + Loyalty Additions) is payable to the nominee. (SAD = 10 times of single premium amount)

Death Benefit under this plan = 10 times of tabular premium amount ie Single premium amount – Taxes.

In this example, for Sum Assured of Rs 5 Lakh, the premium amount is Rs 2,50,330. Out of this, Rs 2,39,550 is tabular base premium and Rs 10,780 is GST.

So, death benefit = 10 times of tabular single premium = 10 * Rs 2,39,550 = Rs 23,95,500.

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 Nav Jeevan Limited Premium Payment Plan – Illustration

The Limited Premium Payment Term plan of NavJeevan Policy works in similar way as above (Single Premium Option), but with two different features.

The Premium Payment Term in this case is 5 years and if the policy holder is above 45 years then he/she can choose 10 times (option-1) or 7 times (option-2) as Sum Assured on Death.

LIC Nav Jeevan Plan – Returns Calculation

Let us now calculate the return on maturity (IRR method) using MS-Excel as below;

As per the above calculations, the expected returns on LIC Navjeevan plan can be around 6%.

Should you invest in LIC Nav Jeevan Plan? – My Opinion

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 Nav Jeevan Plan. Loyalty Additions alone are paid on policy maturity / on death after 5 years of taking the policy.
• Tax Benefit: Under 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 5 lakh, you can claim up to Rs 1.5 lakh only as the benefit under section 80c in that financial year.
• Lump sum investment : If you are investing a lump sum amount as single premium, it is 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, you can consider buying a term life insurance plan. (Read : ‘Best Term Insurance plans‘).
  • As explained in the above illustration, to get around Rs 24 lakh as life cover as death benefit, the premium amount of Rs 2.5 lakh (single premium option) 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. The expected returns on this policy can be around 5% to 6%, 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.,
• Kindly note that the maturity proceeds under Option-2 of Limited Payment plan are taxable as the Sum assured is less than 10 times of annualized premium.

I am sure you are now very clear on how much returns can we expect from these kind of traditional endowment policies. The Investment Returns of around 6% that too over a period of 10 to 18 years sounds very low for me. Kindly be aware of financial products before you buy. Let me know your views. Do share your comments. Cheers!

Continue reading :

1. LIC New Plans 2019-2020 | Features, Snapshot & Review of all the Plans
2. Why (NOT) to invest in LIC Jeevan Shanti plan?
3. Traditional Life Insurance Plan – A terrible Investment option?
4. Top 22 Popular Investment options in India – Features & Snapshot

(The above provided information is based on the limited available data, if required, this article will be edited/updated)

(Post first published on : 17-March-2019)