On Jan 11 2016 LIC has launched Jeevan Shikhar Plan which is participating, non-linked, saving cum protection single premium plan. Let’s look at the features of LIC Jeevan Shikhar in detail.
What is LIC Jeevan Shikhar Plan?
LIC Jeevan Shikhar Plan is closed-ended plan which would be open for sale from January 11 up to March 31 2016. It is a non-linked, with profits, single premium plan, wherein the risk cover is 10 times of tabular single premium providing a combination of savings and risk cover. Official information about LIC Jeevan Shikhar at LIC webpage LIC Jeevan Shikhar Plan. Jeevan means Life and Shikhar means Peak.
- Single Premium Plan: You will have to pay for the policy only once, at time of buying the policy. Usually when you buy an insurance policy you would have to pay premium for some time.
- Policy term or the period for which you are covered is only 15 years. So if you buy an insurance policy at the age of 30 years, the protection would be only till you are 45 years.
- Saving cum Insurance or Endowment Plan: An endowment plans if policy holder dies during the policy term, nominee gets the sum assured plus some returns; if he survives the policy term, he gets back the sum assured and returns. Unlike Term Insurance where if the insured dies during the policy term his family gets the money, but if he survives the policy term he or his family does not get anything.
- Non Linked : It means that it is NOT Unit linked Insurance Plan or ULIP which are combined life insurance and investment plans. In this plan you know,kind off,what you are getting. In case if LIC Jeevan Shikhar Policy risk cover is 10 times of single premium. So if you pay premium of Rs 20,000 then you are insured for 10 times 20,000 i.e 2 lakh.
- Plan is available for minimum age of 8 years maximum age entry is 45 years.
- Closed Ended Plan: In Open-ended insurance schemes one can buy insurance any time during the life of the scheme while in close-ended plans one can buy only during the time the scheme is available. LIC Jeevan Shikhar policy is open for sale from January 11 up to March 31 2016.
- With profits: If LIC makes profits then it will share the profits,also called bonus, with those policyholders who have bought the LIC Jeevan Shikhar policy. There are different kinds of Bonus. In case of LIC Jeevan Shikhar policy profit sharing will be paid at the time of completion of policy along with sum assured. This kind of profit sharing is called Loyalty Addition and is explained in detail later in article here.
- Sum assured is the amount of money an insurance policy guarantees to pay before any bonuses are added. This is also known as the cover or the coverage and is the total amount you are insured for. Maturity value is the amount the insurance company has to pay you when the policy matures. This would include the sum assured and the bonuses. In case of LIC Jeevan Shikhar the cover is 10 times the premium. So if you pay premium of Rs 20,000 then you are insured for 10 times 20,000 i.e 2 lakh. In LIC Jeevan Shikhar policy Minimum maturity sum assured is Rs 1 lakh & maximum maturity sum assured- no upper.
- Loan: Loan facility is available under this LIC New Jeevan Shikhar 837 Plan at any time of the policy period after completion of 3 months.
What is commencement on risk?
From commencement on risk date all death claims become valid. The insurer, however, may inspect the death claim to rule out any fraud. Lets go through the steps in buying insurance policy.
- The first step of buying any life insurance policy is to assess one’s insurance requirements.
- The second part of buying an insurance policy is to fill up a proposal form, which asks for personal details, income details and health-related details. This proposal form along with the first-year premium is then sent to the insurer.
- Depending upon the information you have given, the insurer then assesses your case. This process, in insurance terminology or parlance, is called underwriting. For instance, if your income is not in sync with the amount of cover you have asked for or your medical health puts you at higher risk, the insurer will get back to you for a review or for further medical tests. Only after the insurer decides to insure you does a policy bond get prepared. And it is from this point that a cover becomes active. This is also called the date of commencement of the risk.
- Some insurers communicate this date through email or SMS even before the policy bond reaches you by post. Some insurers also let you choose the date of commencement of risk.
What is the premium of LIC Jeevan Shikhar policy ?
Under this plan, the life assured will have option to choose maturity sum assured & single premium payable will depend on chosen amount of maturity sum assured & age. There is some discount or rebate on the premium too.
Specimen Tabular Single Premium rates for some of the ages per Rs 1000 of Maturity Sum Assured are given below. So if nearest birthday is 30 years then premium would be Rs 425.80 per 1000. So if one wants a cover of Rs 1,00,000 which is 100 times 1000 then premium would be 425.80 *1,00,000/1000 = Rs 42,580. To calculate age and hence premium which depends on age, Life insurance companies use actual date or nearest birthday. Nearest Birthday Age calculates your life insurance age based on your nearest birthday, which could be either your last birthday or your next.
| Age at entry (Nearest Birthday)
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Tabular Single Premium Rates (Rs.)
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| 10 | 398.55 |
| 20 | 410.25 |
| 30 | 425.80 |
| 40 | 514.80 |
What is the rebate on the premium in LIC Jeevan Shikhar policy?
Rebate is a portion returned to an insured as an incentive/inducement to buy. Its like discount. Incase of LIC Jeevan Shikhar policy the rebate that you would get depends on the Maturity Sum Assured and is given in table below. So if your Maturity Sum Assured is Rs 6 lakh i.e your single premium would be 60,000 as Maturity Sum Assured is 10 times the single premium. You would get back Rs 20 per 1000 of Maturity Sum Assured i.e you would get back 20 * 6,00,000/1000 = 12,000.
| Maturity Sum Assured (M.S.A)
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Reduction in Tabular premium per Rs.1000 of Maturity Sum Assured
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| Below Rs.2,00,000 | Nil |
| Rs.2,00,000 to Rs. 4,80,000 | Rs. 15.00 |
| Rs.5,00,000 and Rs. 9,80,000 | Rs. 20.00 |
| Rs.10,00,000 and above | Rs. 25.00 |
What is Nearest Birthday?
To calculate age and hence premium which depends on age, Life insurance companies use actual date or nearest birthday. Nearest Birthday Age calculates your life insurance age based on your nearest birthday, which could be either your last birthday or your next. Here’s how it works.
- If your date of birth is Aug 15,1960 and you are enrolling on Jan 16 2016 then as per your nearest birthday , your age is 2015-1960 = 55 years . This is similar to actual age.
- But nearest birthday on Mar 1,2016 would be 56 yearsas you would nearer to your 56th birthday than 55th birthday. So after 6 months from your birthdate you have to take your add 1 more to your current age.
What is Loyalty addition?
When Life Insurance companies make profits and share the profits with their policyholders they do so by calling it a Bonus. Bonus is not shared with every customer or every policyholder. It is only paid to customers who have bought a Participating Insurance Policy such as traditional insurance policies like the endowment policy, whole life insurance policy and money back plan. Most popular are the Reversionary bonuses which are declared as a percentage rate. They apply to the sum assured of the policy, in respect of the basic policy benefit. Our article,Bonus of Life Insurance Policies, explains it in detail.
Loyalty addition (LA) :This is one time payment which will be given only after completion of certain period, often maturity. Loyalty addition is the incentives given by an insurer as an additional benefit to the insured for keeping the policy in full force throughout the term of the contract. This addition is applicable on maturity sum assured of the insurer. Rates are determined by the insurer on the basis of its performance.
The policy under LIC Jeevan Shikhar plan will be eligible for share in surplus (profits) in the form of Loyalty. Based on LIC’s Loyalty Addition for other policies, Loyalty addition if any, will be payable on death or surrender, provided the policy run for at least five policy year or on policy holder surviving to the maturity.Loyalty addition will be paid in case of death or surrender of your policy for atleast five years. So if you have taken a policy of Rs 3 lakh i.e Maximum Sum Assured is 3 lakh, if you are eligible for Loyalty addition you would get Rs 15 per thousand i.e 15 * 3,00,000/1000 = 4500 as Loyalty addition. If you buy the policy for 12 lakh , you would get Rs 15 per thousand i.e 25 *12,00,000/1000 = 30,000 as Loyalty addition
| Maturity Sum Assured(MSA) | Loyalty Addition |
| Below 2 lakh | Nil |
| 2 lakh- 4,80,000 | Rs 15 per thousand of MSA |
| 5,00,000 to 9,80,000 | Rs 20 per thousand of MSA |
| 10,00,000 and above | Rs 25 per thousand of MSA |
What a policy holder of LIC Jeevan Shikhar will get?
In LIC Jeevan Shikhar plan policy holder will be covered during the term of insurance and will also get money if he survives the policy term.
- On death during first five policy years
- Before the date of commencement of risk : Refund of Single Premium without interest. Single Premium mentioned above shall not include any extra amount if charged under the policy due to underwriting decision and taxes.
- After the date of commencement of risk : Sum Assured on Death equal to 10 times the single premium shall be payable.
- What is commencement of risk? It is the date from which the policy cover is valid or the protection starts. In case of LIC Jeevan Shikhar. In case of LIC Jeevan Shikhar policy one can buy for someone of age 6 years. If the insured is less than 8 years of age, the death risk coverage would start only after the insured turns 8.
- On death after completion of five policy years but before the stipulated Date of Maturity
- Sum Assured on Death equal to 10 times the tabular single premium along with Loyalty Addition, if any, shall be payable.
- Maturity Benefit: If the policy holder is alive at the end of policy term which in case of LIC Jeevan Shikhar Policy is 15 years.
- On maturity, the Maturity Sum Assured along with Loyalty Addition, if any, shall be payable.
Lets see with an example. Suppose Raj, who is 30 years old buys LIC Jeevan Shikhar policy paying a premium of Rs 40,000.
- If he passes during the first 5 years, then the family/beneficiary/nominee will get back Rs 4,00,000, 10 times the single premium amount.
- If he passes away between 5 years to 15 years on taking the policy: then the family/beneficiary/nominee will get back Rs 4,00,000, 10 times the single premium amount + Loyalty addition
- If he is alive when the policy matures, he will get back Rs 4,00,000, 10 times the single premium amount + Loyalty addition
What is I don’t want to cancel or not keep the LIC Jeevan Shikhar policy: Free Look Period.
You can cancel the LIC Jeevan Shikhar policy either during Free Look Period or afterwards but you won’t get your full money back.
Free Look Period: If the Policyholder is not satisfied with the “Terms and Conditions” of the policy, the policy may be returned to the Corporation within 15 days from the date of receipt of the policy bond stating the reason of objections. On receipt of the same the Corporation shall cancel the policy and return the amount of Total Premium paid (being sum of single premium and any extra amount if charged under the policy due to underwriting decision) after deducting the proportionate risk premium for the period on cover, stamp duty charges and any charges incurred on medical examination and special reports.
What is I don’t want to cancel or not keep the LIC Jeevan Shikhar policy: Surrender of policy
A surrender is a full cancellation of a life insurance policy. You are allowed to surrender your policy at any time. Surrender Value is the amount the policyholder will get from the life insurance company if he decides to exit the policy before maturity.
LIC Jeevan Shikhar policy can be surrendered at any time during the policy year. The Guaranteed Surrender Value will be as given below. If the policy is surrendered after completion of five policy years applicable Loyalty Addition, if any, shall also be payable. Single Premium mentioned above shall not include any extra amount if charged under the policy due to underwriting decision and taxes.
- First year: 70% of the Single Premium.
- Thereafter: 90% of the Single Premium.
What are tax benefits on LIC Jeevan Shikhar policy?
Premiums paid towards these insurance plans buys you protection . What’s more – you can also get tax benefits on the maturity amount/returns from insurance plans. Our article Before Buying Insurance Policy to Save Income Tax covers in detail all aspects of claiming tax benefit in buying insurance policy.
- Premium paid is eligible for deduction under 80(C). So you can submit the receipt for the premium paid as an income tax proof.
- Section 80C relates to deduction allowed under investments in instruments like EPF,PPF ,insurance and pension policies upto Rs 150,000.
- Deduction will be allowed only for premiums up to a maximum of 10% of the sum assured for policy issued on or after April 1, 2012.
- For single premium life insurance policy the minimum time period for which the policy must be held by the policy holder in order to retain tax benefits on premium paid is 2 years from date of commencement of policy.
- Maturity amount will be tax free under 10(10D)
How much return would you get from LIC Jeevan Shikhar policy?
LIC Jeevan Shikhar policy is Saving cum Insurance or Endowment Plan. So how much return would you get from the policy. The returns would be around 6-7%. Say a 30 year old buys LIC Jeevan Shikhar policy for Rs Sum assured of Rs 1 lakh. His premium would be Rs 42,850. No rebate as Maturity Sum assured is less than 2 lakh. After 15 years he would get 10 times the premium i.e 4,28,500 + Loyalty addition. Reyurns
How to buy the LIC Jeevan Shikhar policy?
Approach the LIC agent(if you have not been approached) or LIC office. You have to provide:
- Application form/Proposal form. The Revised Proposal Form Numbers are 300, 340 and 360.
- Address proof.
- Age proof.
- Medical reports(if required).
What is LIC Table Number?
All LIC plans / policies have a plan number attached to it. Your Life Insurance Agent gives you the plan name. However, information from LIC for Bonus etc refers to Table Number. For example Jeevan Anand is Plan No 149. Table or Plan number of LIC Jeevan Shikhar policy is 837.
What is UIN number?
UIN of LIC Jeevan Shikhar Policy is 512N305V01. Every life insurance product, whether individual or group, and every rider, should be identified with a unique number; and this number has to be quoted in all relevant documents furnished to the policyholders, other users (public, distribution channels) and also in the statutory returns filed with the IRDA. This number is Unique Identification Number or UIN.This unique number will have ten characters/digits as follows:
- Insurer’s Registration Number allotted by IRDA. C1: 1-3: numeric to indicate the registration number of Insurer allotted by the IRDA to identify the name of insurer in 3 digits;
- Nature of product/Rider: L/N/A/B/C. C2 is an alphabet to indicate the nature of product/rider: L would indicate linked product; N a non-linked product; A: Rider (linked); B: Rider (non-linked) and C: Rider (for both linked as well as non-linked).
- Serial number of the product/rider allotted by IRDA
- C3: 5 to 7 : numeric value to indicate that the product is the nth product of insurer—this is a running serial number to be assigned by IRDA (starting from 001);
- C4: 8 : alphabet –V – to indicate the Version. This is same for all products/riders;
- C5: 9 -10: numeric value to indicate the number of times the product is modified—this is a running serial number starting from 01 for new product, for instance, 02 would indicate Version 02 of the product available for marketing from the date the modification is cleared; the older version could indicate that they are no longer in the market from the date of the latest modification.
- For instance, 107L050V02 would indicate that this is 50th product, which is linked and modified twice, of an an insurer with registration number 107 given by the IRDA
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Insurer’s Registration Number allotted by IRDA
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Serial number of the product/rider allotted by IRDA
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Summary of LIC Jeevan Shikhar
Official information about LIC Jeevan Shikhar is at LIC webpage LIC Jeevan Shikhar Plan. Summary is captured in image given below.
LIC Jeevan Shikhar Policy
Insurance should be bought primarily for the purpose of protection and not solely for availing the tax benefits. Buying insurance policy is a long term commitment and one should make sure that one is buying insurance policy for right reasons for its easy to buy but difficult to come out. Please remember that policy term is only 15 years and buying any insurance at older age is expensive. So what do you think of the policy? Are you planning to buy the policy?
