Whether it is LIC Jeevan Anand or LIC New Jeevan Anand, the Anand(happiness) is only for the agent, not for you. If you do not want to read the complete article regarding LIC Jeevan Anand review, returns and policy details with example, the advice for you is -Do Not Buy This Policy!!
Still interested in knowing why you should not buy? Here we go-
LIC Jevan Anand policy from LIC of India is a combination of Endowment and Whole Life policies. As most of the people are not able to understand the jargon of insurance products,I have tried to review the product with an example.
Jeevan Anand provides protection against death throughout the lifetime of the life assured with the provision of payment of a lump sum at the end of the selected term in case of survival.
Jeevan Anand Policy– How the plan works
In Jeevan Anand, Sum Insured along with Bonus will be payable to the party at the end of the selected term.So, sum assured and accured bonus are the features of an endowment policy. But the insurance cover will continue after this payment also, till the lifetime of the party and Sum Insured will be payable to the nominee on the death of the party.This is where the concept of whole life policy comes in.
LIC Jeevan Anand Policy– Policy Details with Example
Features of the policy- Policy details
a) Minimum Age : 18 years
b) Maximum Age : 50 years
c) Maximum Maturity Age : 75 years
d) Minimum Policy Term : 15 years
e) Maximum Policy Term : 35 years
The minimum sum assured is 1 Lakh and maximum is unlimited.
Let me explain it with an example:
- Mr. X who is taking this policy on 15th April, 2011
- Age at the time of taking the policy: 30 years
- Sum Insured – Rs. 10 Lakhs
- Policy Term – 25 years; Premium Paying Term – 25 years
- Yearly Premium – Rs. 41,206/-
- Date of Maturity – 15th April, 2036
- Amount payable on 15.04.2036 – Sum Assured of Rs. 10 Lakhs + Bonus for 25 Years
How much will be payable on 15th April, 2036?
The amount payable at the end of the selected term will be the total of Sum Insured and the Bonus declared by LIC. The latest bonus rate is Rs. 42/- per thousand Sum Insured . This will be Rs. 42,000/- for Rs. 10 Lakhs policy, which will be payable in 2036. This bonus will depend on the experience of LIC and is not assured. If we assume this rate to continue for the next 25 years, the amount payable as bonus in this policy will be Rs. 10.5 Lakhs (Rs. 42,000×25 years= Rs. 10.5 Lakhs). So the party will get around Rs. 20.5 Lakhs.
(Sum Insured Rs. 10 Lakhs + Bonus 10.5 Lakhs) in 2036.
What happens after 2036?
The last premium for the policy would have been paid in 2035 and he received the above mentioned amount in 2036. Now the risk cover will continue to be available in the policy without paying any further premium. This cover of Rs. 10 Lakhs will continue till his lifetime and on his death, the amount of Rs. 10 Lakhs will be paid to the nominee.
So this policy is a combination of an Endowment and Whole Life Policy.
What happens in case of death before 2036?
In this case, the nominee will get the Sum Insured (Rs. 10 Lakhs) and the Bonus till date of death and the policy closes. No further payments will happen later on.
This plan is a modified version of the most popular Endowment Plan of LIC. The premium for Mr. X in Endowment Policy comes to Rs. 37,819/- less by Rs. 3,387/- compared to Jeevan Anand. But the extra death cover till lifetime, makes it attractive compared to Endowment Policy.
LIC Jeevan Anand Returns
We have calculated the current Bonus rates for the next 25 years for our example. Bonus rates are on the decreasing trend and are likely to continue to do so in future. Even with the current bonus rates, the Internal Rate of Return for LIC Jeevan Anand will be around 5%, without considering the life cover after the maturity date.
Also Read: Term Insurance Benefits
Investing in Term Insurance and Mutual Funds
Now, let us see what happens if you invest the same amount in equity mutual funds after buying a term insurance plan of 1 Crore(Yes, 1 Crore). The premium is around Rs. 8,500 without any riders.
Amount available for Investments -Rs. 41,206 (the premium which you are paying for Jeevan Anand Policy)
Term Insurance Cover Premium – Rs, 8,500 (Age-30, Cover -1 Crore, Term -30 Years)
Surplus available for investments – Rs. 41,206 – Rs. 8,500= Rs. 32,706
If you invest this Rs. 32,706 in mutual funds for next 25 years, the maturity amount would be 32.5 Lakhs after 25 years assuming a CAGR of just 10%. If I assume a CAGR of 12%, the maturity amount would be Rs. 43.5 Lakhs.
So, you are getting a term insurance cover of 1 Crore for a term of 30 years and surplus of 12 Lakhs(CAGR-10%)/23 Lakhs(CAGR-12%) after 25 years with the same amount of investments.
Surplus= Value from Mutual Funds after 25 Years – Maturity Value from Jeevan Anand after 25 Years
Also Read- How much insurance do in need calculator?
LIC Jeevan Anand Review
If you are a very conservative investor, and if you are happy with this very conservative return, you can go for this policy. But there is no need for an insurance cover after your retirement, if nobody is financially dependent on you. Otherwise, a combination of Mutual Fund plus Term Insurance will be a better option for you.
Should I surrender my Jeevan Anand Policy?
Ok, I got your point. The policy is not good, I should not buy it.
What should i do with my existing Jeevan Anand Policy? Should i surrender it or continue the policy?
This is not an easy decision because it is always difficult to accept that I am loosing my capital and there is no surety of mutual funds returns. Let us see if you should actually surrender it.
First check the policy of term. If the policy term is 15 Years and you have already paid the premium for 9 years, there is no need to surrender.
In the same scenario if the term of the policy is 35 years and you have paid premium for 9 years, it is better to surrender the policy.
If I have to generalize it, then surrender the policy if you have pending premium payment term of more than 10 years. Also, invest the surrender value and future premium in mutual funds, you would be better off.
So, What do you think? Is it worth buying “LIC Jeevan Anand Policy” or Term Insurance and Mutual Funds are better options.