Life Insurance Corporation launched endowment plan, Jeevan Lakshya, Table No 833 in Mar 2015. Under the LIC Jeevan Lakshya Plan if the policy holder dies while the policy is in force his nominee will receive regular payment andif the policy holder survives after the expiry of the policy, policy holder will receive a lump sum which includes the Bonus. We will look into the plan, LIC  Jeevan Lakshya Plan in detail in this article, what are the features, what are the riders,what is return from the plan?

What is Jeevan Lakhsya Plan?

In Jeevan Lakhsya Plan, if the policy holder dies while the policy is in force his nominee will receive regular payment and if the policy holder survives after the expiry of the policy, policy holder will receive  a lump sum which includes the Bonus. Technically it’s a moneyback plan which is participating(you get bonus) and non-linked (not tied to stock market i.e it’s not ULIP) plan. It  offers a combination of protection and savings. Purpose of the plan is ,in case of the demise of policyholder any time before maturity,to  provide for annual income benefit  to fulfil the needs of the family, primarily for the benefit of children and a lump sum amount payment at the time of maturity. One can add LIC’s Accidental Death and Disability Benefit Rider  by paying additional premium.

Features of Jeevan Lakhsya Plan

Features of LIC Jeevan Lakhsya Plan are given in table below:

Sample Premium Rates for Jeevan Lakshya Plan

Following are some of the sample annual tabular premium rates (in Rs.) (exclusive of service tax) per Rs. 1000 Basic Sum Assured.

How to read the table:

Age of person is in the first column so 20,30,40 and 50 years. The premium to be paid per 1000 of Rs Sum Assured is  across the columns.  We have highlighted in red premium to be paid by someone who is 30 years old and wants policy for 15 years for Sum Assured of Rs 1 lakh(1,00,000) then from the table the annual premium is 83.30 per 1000 Rs. As he is going for basic sum assured of Rs 1 lakh, his premium, without service tax, would be 83.30 * 100000/1000 =  Rs 8330 per annum. This is without the service tax.

Understanding LIC  Jeevan Lakshya Plan with Example

Lets understand  LIC Jeevan Lakshya Plan with help of example. Say Rahul, of 25 years age, purchases LIC Jeevan Lakshya Policy with a Sum Assured of Rs 10 Lakh  for 20 years. He would pay premium for 3 the policy terms i.e for  17 years (20-3 years).

Death Benefit  : In case of unfortunate death of  Rahul after 5 years from the date of policy purchase, his nominee will receive ;

• From 6th year to 20th year, 10% of basic sum assured i,e a sum of 1 Lakh every year.
  
• At the end of the policy term after 20 years, nominee will receive  110% of sum assured i.e 11 Lakh + Accrued Bonuses + FAB (Final Additional Bonus, if any)

Maturity Benefit : Suppose if Mr. Sharma survives till the policy term maturity, he will receive ,Maturity amount = Sum assured  i.e 10 Lakh + Bonus + Final Additional Bonus (if any)

What are Riders available with LIC Jeevan Lakshya Plan?

Riders are additional covers that can be added to a life policy, for a cost For example,  If Akshay, has taken a policy which offers a sum assured of Rs. 10 lakhs and has taken an accidental death benefit rider of an additional Rs. 10 lakhs. In the event of death of the policy holder due to an accident during the tenure of the policy, the nominee would get Rs. 20 lakhs as the death benefit. These Riders are optional. Our article Life Insurance explains many such terms. Riders available with LIC Jeevan Lakshya Plan are

• LIC Accidental Death and Disability Benefit Rider : In Case of death of policy rider, during the policy term, Accident Benefit Sum Assured will be paid to the nominee.  In case of accidental permanent disability, an Accident Benefit Sum Assured will be paid in the form of dividing the amount into equal monthly installments spread over 10 years and all the future premiums for Accident Benefit rider are waived off.  This rider can be opted at any time during the Premium Paying Term (PPT) of the Basic Plan. The benefit cover under this rider shall be available during the policy term. The maximum sum assured offered under this rider is Rs 1 crore (subject to the limit of Basic Sum Assured).
• LIC New Term Assurance Rider: LIC’s New Term Assurance Rider provides for life cover in case of unfortunate death of the insured during the cover period. It can be attached with a basic policy to provide add-on benefit at a nominal cost. This rider shall only be attached with Non-Linked plans at the time of taking the policy. Its Benefits are:
  • Death Benefit: In case of unfortunate death of the life assured during the term of the Rider, an amount equal to the Term Assurance Rider Sum Assured shall be payable.
  • Maturity Benefit: On survival to the end of the term of the Rider, nothing shall be payable. This rider is available only at the time of taking the policy. The maximum sum assured offered under this rider is Rs 25 Lakh.

How much is the bonus and Final Addition Bonus of LIC?

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. The percentage of bonus that is paid to the policyholder is not fixed. We shall touch two kinds of bonus, here Simple reversionary bonus and Final Addition Bonus. To know more about the bonus of Insurance Policies you can read out article , Bonus of Life Insurance Policies and Bonus of LIC(Coming soon).

• Simple reversionary bonus is a with profits life assurance bonus, normally declared annually, which is based on the profits of the life company’s investment and is payable at the maturity of the policy or prior death. Simple reversionary bonuses are declared as a percentage rate, calculated on the sum assured. For example if you hold a policy of Rs 10,00,000 Sum assured and the simple reversionary bonus for the year declared is Rs 60 per thousand sum assured, then your bonus amount is Rs 60 * 10,00,000/1,000 which is Rs 60,000 for this year, but you will only get it at maturity or on death.
• Terminal bonus or Final addition bonus : The terminal bonus is given at the end of the life of traditional policies. Its value is not guaranteed  and it is different from the reversionary bonus, which is paid out annually by insurers. After declaring reversionary bonuses if there are still residual profits available in the policy, they are declared as terminal bonus.

Insurance companies declare bonus rates and information is available on their websites , for example  bonus rates of LIC, bonus rates of ICICIPruLife. To find how much bonus your policy has collected you can register your policy online and check details or contact the insurance adviser or insurance company with your policy details.

Returns of the LIC Jeevan Lakshaya Plan

The Expected returns from LIC Jeevan Lakshya are around 6%. Let’s see with example. Policy duration is 25 years for Basic sum assured of Rs 100000 with premium of Rs 4366 and the Premium Payment Term of 22 years (25-3 years). Assuming Rs 45 per Rs 1000 Sum assured as Yearly bonus and Rs 300 as Final Additional Bonus, on maturity policy holder will get around Rs 2.425 lakh(100000 (Basic sum assured)+45*100*25+100000 (for Bonus every year) + 100*300 9 (for Final Addition Bonus)) after investing 96,052(4366 * 22). So if you calculate returns using using IRR (Internal Rate of Return) function of MS Excel you would get 7%. Our article Understanding Returns: Absolute return, CAGR, IRR etc explains the different returns in detail. The details are shown below

Should one buy LIC Jeevan Lakshya Plan?

Wearing a helmet while driving is inconvenient but is useful in an accident. Reaching an hour or two early before the scheduled departure of flight prevents one from missing the flight though time is wasted just sitting at the airport. Similarly Insurance provides financial protection against unexpected events and Life insurance is meant to offer financial protection to dependants in the unfortunate event of one’s death. Its purpose is to enable one’s dependants to maintain their current life style and pursue their life goals.  Purpose of the LIC Jeevan Lakshya Plan is ,in case of the demise of policyholder any time before maturity,to  provide for annual income benefit  to fulfil the needs of the family, primarily for the benefit of children and a lump sum amount payment at the time of maturity

Generally, the returns from Money back and Endowment Plans are in the range of 5 % to 7 % and  are  dependent on the bonus rates ( Simple Reversionary and Final Additional Bonuses) that LIC declares every year. Now, the problem with mixing life cover and investment is you get superior returns from none. If a person buys a term plan, and invests the rest of the amount in a public provident fund (PPF), he can make more money than what the money back/endowment insurance plans  offered.  Term insurance, has the lowest possible premium among all the other insurance plans available.  PPF is government backed fixed income investment. PPF will also give him tax advantage. One gets the same amount of life cover as term plan and a better corpus by splitting the two. If somebody can live with volatility and instead of putting in PPF,put in  an equity fund and assume a return of 10-12% , then your corpus would be even more. Our article Mixing Insurance with Investment shows how PPF and Term plan can give a higher return and why one should keep Insurance and Investment separate.

• Kindly stay away from these kind of plans if you are expecting higher Rate of Returns.
• Do not buy this plan just because it offers you Tax Saving benefits. There are better Tax Saving Investment options available in the market. For example, PPF (Public Provident Fund). Do go through our Checklist for buying Life Insurance Policy

 All information is also available at LIC’s webpage about  Jeevan Lakshya plan.

Related Articles:

• Life Insurance
• Understanding Returns
• Understanding Public Provident Fund, PPF
• Mis-Selling or Mis-Buying: It’s My Money, My Responsibility
• Discontinue Life Insurance Policy: Surrender,Paid Up,Loan

If you are buying the plan please be aware of the reasons why you are buying it. For my daughter’s education I have bought a money back plan from LIC. Though it was to keep my parents and inlaws happy but looking back it gave me a sense of security too and diversified my investment for my daughter’s education.What are  your views on LIC Jeevan Akshay plan? Have you bought any money back/endowment policies. Do share your comments.