LIC Jeevan Nischay – Review
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27 Comments
Buoyed up by the success of Jeevan Aastha, its last guaranteed return plan, Life Insurance Corporation (LIC) has come out with another such plan. India’s biggest life insurer has launched LIC Jeevan Nischay – a single premium guaranteed return plan. This is a very conducive atmosphere for a product like Jeevan Nischay looking at the tight economy and an uncertain stock market. This is supported by the fact that mutual fund players booked profits by selling capital protection products in past few months. However, this is also true that though ‘Guaranteed Products’ like Jeevan Nischay offer investors an opportunity to earn assured returns while protecting their downside risk they also miss the upside potential, unlike in MF’s open-ended schemes or ULIPs, in case the market goes in favour of the fund.
Highlights - This plan is available to only those who have an existing insurance policy with LIC
- Besides guaranteed maturity benefits, it offers loyalty additions
- Incentives are offered if premiums are Rs 25,000 and above
- The plan opens on October 29, 2009 and closes on March 31, 2010
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Background
Established in 1956, LIC has become a household name in India. It has sold over 3.58 crore policies and has assets under management (AUM) around Rs 8.74 lakh crore as on Sept 2009. It has built brand relationships with its policyholders and people of India through its wide spectrum of products covering all aspects of human life risks. LIC continues to be the indomitable market leader, with a market share of 62.45 per cent and 69.88 per cent policies as on June 30, 2009. The corporation has emerged as an institution of the masses, trying to help them bridge a gap arising out of their changing preferences and rising aspirations.
Product highlights
• ‘LIC Jeevan Nischay’ is a close-ended single premium plan, exclusively for LIC policyholders.
• It comes with guaranteed maturity benefits and a provision for loyalty additions.
• It offers policyholders flexibility to choose premium amount which will in turn decide their maturity sum assured.
• The minimum age and maximum age for entry being 18 years and 50 years, respectively.
• The policy is available for three different terms – 5, 7 and 10 years.
• The minimum single premium is Rs 10,000 and the maximum being Rs 10,00,000.
Benefits of ‘Jeevan Nischay’
• ‘LIC Jeevan Nischay’ provides maturity benefit – an amount equal to the Sum Assured – along with loyalty addition, if any, declared.
• Death benefit in the first year of the policy is five times the single premium.
• There is an incentive for high premiums paid, i.e., Rs 25,000 and above, which means a higher maturity sum assured for a policyholder.
• It provides guaranteed surrender value up to 90 per cent of the premium paid if the policy is surrendered after one year of its commencement.
• Loan facility is available after the first year of the policy.
• If the policyholder is not satisfied with the terms and conditions of the policy, he/she can return the policy within 15 days of the purchase date and get refund.
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Analysis
Till date, LIC has rolled out different kinds of plans matching the needs and aspirations of different kinds of people. Its new product LIC Jeevan Nischay offers some exclusive benefits to its existing policyholders, helping the corporation cement its ties with its customers further. The plan offers policyholders guaranteed returns; the maturity sum assured is pre-defined here, thus, providing a guaranteed return to its investors. LIC also pampers its customers with an incentive if they pay a premium of Rs 25,000 and higher than that. Let’s see how the plan works for a 35-year old.
If the person invests Rs 25,000 in the plan for 10 years, he will receive Rs 44,674 as the guaranteed amount and Rs 8,935 as the variable component (refer Table 1) based on the performance of LIC (as computed by LIC in its benefit illustration). Thus, the annualised return for the person will be 7.93 per cent. However, the return will drop with the increase in the age of policyholders due to increased mortality rate. The different returns for different terms are mentioned in the table below.
Table 1: Benefits Offered by LIC Jeevan Nischay Premium (Rs) Term (Yrs) Maturity Benefit (Rs) Annualised Return (%) (Min-Max)2 Death Benefit3 (Rs) Guaranteed Variable1 Total 25,000 5 32,291 3,229 35,520 5.25-7.28 32,291 25,000 7 36,468 5,470 41,938 5.54-7.67 36,468 25,000 10 44,674 8,935 53,609 5.98-7.93 44,674 Illustration is for a 35-year-old individual; 1 Depends upon the performance of corporation; 2 Returns are tax-free; 3 Death benefit is five times premium amount in the first year irrespective of the term. Read Life Insurance guides – Click Here
Equating with other products
We do not recommend mixing of insurance with investment unless investment costs are very low and investment horizon is more than 15-20 years. In the past, there had been some guaranteed return insurance products such as LIC’s Jeevan Aastha, Aegon Religare’s Guaranteed Return Plan that provided returns in the range of 6.75-7.25 per cent. In comparison, Jeevan Nischay’s guaranteed returns fall in the range of 5.25-5.98 per cent. But if we include loyalty additions, based on LIC’s historical payments, the returns come in the range of 7.28-7.93 per cent.
Table 2: Comparison of LIC Jeevan Nischay with a Tax-saving FDs with a Term Plan Investment Amount Maturity Benefit Return, % (Min-Max) Death Benefit2 (Rs) Guaranteed Variable1 LIC Jeevan Nischay 25000 44674 8935 5.98-7.93 44674 Term Plan + Tax Saving FD 245003 52164 (7.85%) Nil 6.284-7.075 100000 Term Plan + NSC6 24500 53683 Nil 6.534-7.345 100000 1 Depends upon the performance of the corporation; 2 Death benefit in case of Jeevan Nischay is Rs 1.25 lakh in first year followed by maturity amount in subsequent years; 3 Rs 500 has been deducted from the investible amount for purchasing Term Insurance of Rs 1 lakh for a period of 10 years.4Return net of TDS(20%) 5 Return net of TDS(10%)6 National Savings Certificate gives 8% return compounded half-yearly. Currently, the market does not have any similar comparable product. Nevertheless we can compare LIC Jeevan Nischay with a combination of a tax-saving FD and a term plan. The term plan provides a life cover of Rs 1 lakh for an assumed single premium of Rs 500. It provides returns in the range of 6.28–7.07 per cent, after deducting the net TDS at 10-20 per cent. Further a combination of NSC with a term plan will give returns in the range of 6.53–7.34 per cent. It will go down further for investors in higher tax bracket (30 per cent).
Tax benefit
LIC Jeevan Nischay provides tax benefits under Sec 80C of the Income Tax Act, where premium paid is eligible for tax deductions up to Rs 1 lakh. The maturity proceed is also exempt from tax under Section 10(10D).
Things to look into
The policy is strictly for existing LIC policyholders. But policyholders who have only an annuity or pension plan without risk cover cannot avail this plan. Loyalty additions or bonuses mentioned in the plan brochure are not assured.
Recommendations
Investment in this plan should be made with a view of getting some guaranteed return. Though insurance and investment is not an ideal mix, LIC policyholders with surplus cash can consider investing in the plan for assured income in this current volatile market. Jeevan Nischay’s tax-saving aspect is another reason why one should give it a try. The plan provides a tax-free return of 7.28-7.93 per cent as against other tax-deductible products that give a pre-tax return of 8-8.5 per cent which reduces further for those falling in higher tax bracket.
However, the RBI is set to roll back its expansionary monetary measures, resultantly, interest rates will shoot up (by the end of financial year 2009-10), and so will the deposit rates. Hence, it is likely that in pursuit of guaranteed returns, investors may lose a chance to earn higher interest in future.
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How to invest in the plan?
LIC policyholders can buy the plan directly from LIC offices in India or the corporation’s bank partners or through LIC agents.
Summing it up
Guaranteed return products have found favour among Indian investors, especially among those who have burnt their fingers in the recent financial meltdown. To cash in on this, many insurance companies have introduced guaranteed return products. However, these products may carry higher risks arising from the fact that insurers may not honour their commitments. Thus, investors should not completely depend on guaranteed return products such as ‘LIC Jeevan Nischay’ instead they must strike a balance between these products and other products, securing and strengthening their portfolio.
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Published on November 4, 2009 · Filed under: Personal Finance; Tagged as: fixed deposits, Guaranteed Return Products, Guaranteed Returns, Insurance, Jeevan Nischay, LIC, LIC Jeevan Aastha, LIC Jeevan Nischay, LIC Jeevan Nischay Offer, LIC Jeevan Nischay review, Life Insurance Corporation of India
27 Responses to “LIC Jeevan Nischay – Review”
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Anand said on November 4th, 2009 at 9:32 pm
can you compare the returns using the 8% tax saving FDs that banks have?
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Anand said on November 4th, 2009 at 9:32 pm
can you also compare this with NSC or KVP schemes?
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vikram said on November 5th, 2009 at 9:33 am
I really apreciate your detailed analysis and consie conclusion about this policy
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ramakrishnan said on November 7th, 2009 at 1:43 pm
very good analysis of jeevan nischay plan.please compare with post office guaranteed return schemes.
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naresh said on November 20th, 2009 at 8:13 pm
Anand :can you also compare this with NSC or KVP schemes?
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admin said on November 21st, 2009 at 10:29 am
@naresh Post has already been updated with a comparison with NSC and Term plan combination with LIC Jeevan Nischay
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KUMAR said on November 21st, 2009 at 10:14 pm
WELL DONE. A small correction on your well donr job that is POLICY HOLDER CAN NOT BUY THE POLICY DIRECTLY. It will sold by an agent or our corborate agent only.
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Vikash said on November 23rd, 2009 at 2:33 pm
Great analysis.
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SMitha said on November 24th, 2009 at 1:04 pm
Hi,
can you please send me some details about a child care policy? my kid is now 6 years old…
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Mahesh Dhoot said on November 25th, 2009 at 11:58 am
very good analysis of jeevan nischay plan.please compare with post office guaranteed return schemes and similar plans of pvt insurance companies
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Bachi said on November 25th, 2009 at 8:29 pm
I want to know details regarding Plans which are specifically only for Insurance coverage.
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Manoj said on November 25th, 2009 at 11:01 pm
pls give me details of jivan nichay plan.
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Deepkamal Verma said on November 26th, 2009 at 12:05 pm
It is possible some of your officer make contact for the execution of jeevan nischay plan.
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admin said on November 26th, 2009 at 1:57 pm
Please visit our Life Insurance Section to apply for this product or fill in your details in the Let Us call you section on the right
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Himanshu said on November 27th, 2009 at 8:49 pm
1. Jeeavan Astha was opened for everyone but not Jeevan Nischay?
2. I already have Jeevan Astha, so am I eligble for this policy? -
Pradeep Gupta said on December 28th, 2009 at 3:42 pm
@Himanshu
Hi Himanshu, You can enrol into Jeevan Nishchay only if you already have an LIC policy.Best Regards,
Pradeep -
vidyasagar s maheshkar said on December 30th, 2009 at 5:30 pm
very good analysis of jeevan nischay
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vikas said on January 12th, 2010 at 12:20 am
FDs, NSC, KVP,MIS,RD all these wont get you all the benefits like lic s Jeevan Nischay, where you get precious insurance cover which will help your dependents in your absence.. think over this also..@Anand
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vikas said on January 12th, 2010 at 12:27 am
there r smart tailor made plans for your childs future education with minimum span of premium commitment from parents’ pocket.. for more details pls mail me at vikas_jain.insurance@yahoo.com, with your details for a detailed presentation..@SMitha
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vikas said on January 12th, 2010 at 12:29 am
there r couple of such plans in the market, for details mail me at vikas_jain.insurance@yahoo.com with your details..
@Bachi -
hi,
there is one good children dream plan,pls give me a call back on 9987512382 or mail at maqsood investments@yahoo.co.in -
Very Good Analysis Thanks about that….I am planning to go for a Jeevan Nischay Policy.
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aman said on March 1st, 2010 at 12:45 am
I am saving above my 1 lac limit in 80(c) in provident fund. For a term of 7 years which one gives me better returns? PF or Jeevan Nishchay
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aman said on March 1st, 2010 at 1:13 am
please give me a take on wealth plus launched by LIC recently that is analysis PF versus WealthPlus
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Deepa said on March 10th, 2010 at 12:19 am
Which is more beneficial Jeevan nischay or post office MIS?
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Natasha said on June 28th, 2010 at 3:10 pm
Thanks for writing about this informative blog. It helped me a lot.
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Natasha said on June 28th, 2010 at 3:10 pm
Thanks for writing about this informative blog. It helped me a lot.
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