Today I happened to call an LIC (Life Insurance Corporation Of India) Agent aka Insurance Advisor, as I had an insurance requirement. The gentleman came prepared with all his documents. After the initial pleasantries were exchanged, he started drawing some charts, which looked more like my future kundali than financial planning. He discussed a whole bunch of insurance policies, starting from Jeevan Saral moving onto Jeevan Aastha and concluding with Jeevan Anand. Believe me, after listening to all he had to say about these policies and underlying sales-pitch, I was forced to day dream of becoming a millionaire. I got really confused and was not able to decide which one to opt for. But eventually, the agent helped me make the final decision and we settled on Jeevan Anand, as according to him, it best suited my financial planning and future purposes. Whatever I got out of this somewhat lengthy discussion, I would like to share with you.
Jeevan Anand is a combination of Endowment Assurance (a life insurance designed to pay a lump sum after a specified term, usually on its ‘maturity’ or on death, whichever is earlier) and Whole Life Plan (a type of life insurance contract that provides for insurance coverage of the contract holder for his/her entire life). Under this plan, you have to pay a fixed premium amount for a particular term. On survival, you will get a lump sum amount, which will be equal to the Sum Assured (SA) plus Accumulated Bonuses and Final Additional Bonus at the end of selected term. If death happens before the maturity, the survivor/nominee gets all the aforementioned benefits. The main feature of this plan is you are insured for you whole life, even after your maturity period is over. If death happens after the maturity period, the survivor/nominee will only get the Sum Assured(SA). No wonder, it has been marketed with a tag-line “Zindagi ke saath bhi Zindagi ke baad bhi” :-)
Some other salient features of this insurance policy follow
- Premium Payment Frequency : You can choose different payment frequency like monthly, quarterly, half yearly or yearly.
- Age Limit : Age limit for premium is 18 to 65 years and limit for premium paying term accordingly is set to 10 to 57 years (Total age till which this policy is valid is 75 Years)
- Loan Availability : You can avail a loan against your policy after paying premium for 3 years.
- Sum Assured : The minimum amount for sum assured is 1 lakh whereas max is unlimited.
- Accident Benefit : In case of death by accident (subject to an age limit of 70 years), the policy holder can get an additional sum assured upto Rs 500,000. In case of permanent disability of the policy holder (due to accident), the additional sum assured is payable in installments.
- Tax Benefit : Under the present income tax regime, you can claim tax exemption under Section 80C.
Let us illustrate all the benefits for this policy by taking an example:
- Profile : Ram,aged 35, takes a Jeevan Anand Insurance policy for 25 years for sum assured of Rs 1 lakh.
- Premium Amount : Rs 4,535 annually
- Total Premium Paid : Rs 1,13,375
- Benefit On Survival: After maturity, he gets Rs 1,41,500 (in the worst-case at a growth rate of 6%). In the best case, when growth-rate is to become 10%, he will receive 2,41,000 Rs. Apart from the Sum Assured i.e, Rs 1 Lakh, the bonus accrued will be 41,500 (at 6% growth-rate) and 1,41,000 Rs (At 10% growth-rate). For the last financial year, LIC had announced an Accumulated Bonus as about Rs 45 per Rs 1000 per year.
- Benefits On Death Before Maturity: If Ram dies within premium term, he will be receiving an amount= Sum Assured that is 1 lakh+accrued bonus till his death.
- Benefits on Death After Maturity : If Ram dies after premium paying term and maturity period, He will be receiving an amount=sum assured only that is Rs 1 Lakh.
Before jump to a decision of taking Jeevan Anand, the first thing you have to decide is whether you plan to for Investment or Insurance. If you look at Jeevan Anand as an Investment Avenue, it’s not good. It takes almost 25 years for your amount to double, which means very poor gain. So if you are looking for investment, I would advise against Jeevan Anand. It’s better to opt for any other investment options like Real Estate, Stocks, Mutual Funds, which promises farm more returns as compared to what Jeevan Anand may offer. In fact, some mutual funds also has Insurance facility as well as tax benefits. On the other side, if you are looking at Jeevan Anand from an Insurance Perspective, even then I would advise you against it. If you are looking for insurance, it’s always better to go for a Pure Term Insurance Plan. Yes, it will not give you any benefit at the end of maturity, but will provide you with a healthy insurance cover and that too at a premium far less than you would pay for Jeevan Anand.