LIC's Jeevan Vriddhi: A Review - Personal Finance 2.01

LIC has launched a single premium plan today, i.e. March 1, 2012 which guarantees a maturity amount as well as a possible loyalty bonus and which looks very attractive. Let's dig deeper and find out the pros and cons of the new LIC policy.

But before we start, the perennial question of comparing insurance and investments. Insurance is of course different from Investments and we need not confuse the two. Insurance is generally a long term contract, and with potentially higher commission costs. However, insurance premium gives you a tax deduction and the insurance lump sums are tax free.

On the other hand, pure investment products like stocks and mutual funds sound much more alluring but comes with a risk tag. And generally, the common investors make a mess of the returns because of greed and fear.

While we debate the insurance v/s investment in theory, here comes a policy which combines the best of both worlds. Enter LIC. ?Jeevan Vriddhi combines a risk cover (five times the premium), tax benefits under Sec 80C, guaranteed maturity amount, one time payment, liquidity (loans available after 1 year) and also tax free maturity amount. And not to forget a possible return of 12% over the 10 year term!!. Here are the details:

?

Benefits

i) Maturity Benefit: On maturity, the Guaranteed Maturity Sum Assured along with Loyalty Addition, if any, shall be payable.

ii) Loyalty Addition: Depending upon the Corporations experience the policy will be eligible for Loyalty Addition on date of maturity at such rate and on such terms as may be declared by the Corporation.

iii) Death benefit: On death, Basic Sum Assured shall be payable. The Basic Sum Assured shall be 5 times the Single Premium excluding extra premium, if any.

ELIGIBILITY CONDITIONS AND OTHER RESTRICTIONS:

a)??????Minimum Entry Age? ??????????? ??????????? : 8 years (completed)

b)??????Maximum Entry Age ??????????? ??????????? : 50 years (nearest birthday)

c)??????Minimum Basic Sum Assured????????? ? : Rs.150, 000/-

d)?????Maximum Basic Sum Assured???????? ? : No Limit

e)??????Minimum Premium?? ??????????? ??????????? : Rs. 30,000/-

Premium shall be available in multiples of Rs. 1,000/-.

f)???????Policy Term??????????????? ??????????? ??????????? : 10 years

g)??????Premium payment mode?????? ?????????? ? : Single premium only

h)?????Guaranteed Maturity Sum Assured : The Guaranteed Maturity Sum Assured will depend on the single premium payable?and the age at entry of the life to be assured.

GUARANTEED MATURITY SUM ASSURED:

Guaranteed Maturity Sum Assured for each age at entry per Rs.1000/- Single Premium (exclusive of Service Tax) is as under:

Age at entry	Guaranteed Maturity Sum Assured (Rs.)		Age at entry	Guaranteed Maturity Sum Assured (Rs.)		Age at entry	Guaranteed Maturity Sum Assured (Rs.)
8	1984.60		23	1952.65		37	1894.60
9	1982.10		24	1951.85		38	1883.65
10	1979.15		25	1950.95		39	1871.20
11	1975.55		26	1949.90		40	1857.10
12	1972.10		27	1948.55		41	1841.45
13	1968.90		28	1946.85		42	1823.95
14	1966.35		29	1944.55		43	1803.90
15	1964.05		30	1941.60		44	1781.05
16	1961.90		31	1937.70		45	1755.30
17	1960.00		32	1932.80		46	1726.55
18	1958.30		33	1927.00		47	1694.75
19	1956.80		34	1920.40		48	1659.95
20	1955.50		35	1912.85		49	1622.60
21	1954.40		36	1904.30		50	1582.25
22	1953.45

INCENTIVE FOR HIGHER PREMIUM:

Incentive for higher single premium by way of increase in the Guaranteed Maturity Sum Assured is as under:

Premium (excluding extra premium)	Increase in Guaranteed Maturity Sum Assured
Below Rs.50,000	Nil
Rs.50,000 to Rs. 99,000	1.25%
Rs.1,00,000 and above	3.00%

Benefit Illustrations:

LIC's website has the illustrations where the Rs 1 lakh invested returns Rs 197023 or Rs 221651 at the end of the 10 year term. Take as look:

The Returns:

Case 1: If someone who is in 30% tax slab invest Rs 1,00,000/- in it he will save Rs30,000/- as tax benefit so his net investment becomes Rs 70,000/- and on which he is getting Rs 2,21,651 which is 100% tax free so the?net yield in this plan is more than 12%.

Case 2: If the investor is in 30% tax slab and his 1lac limit of secton 80 C already used, even it is great investment for him as if he had invested in banks he has to pay the taxes on maturity @30% (Rs 121651 @ 30% = 36495 goes in taxes ) but here in LIC JEEVAN VRIDDHI he is not taxed at all so still it is a good investment.

What's the catch?

While the plan looks very attractive, here are some things to watch out for:

?

• Service tax @10.3% has been excluded from the calculations. So if you add the service tax, the returns come down to 11% from 12%
• If you don't add the tax benefits, the returns come down to approx. 6 - 7 %.
• The loyalty addition is not guaranteed and will depend on LIC's experience
• The tax benefits is as per existing laws. When the Direct Tax Code sets in from April, 2012, the tax benefit under Sec 80 C will go.
• The tax free maturity amount is an assumption under existing tax laws. That can change 10 years from now.
• Risk cover is only 5 times and may not be adequate.

We think it is a nice combination of insurance and investment. Disclaimer: We are not agents of LIC

Any questions? Please send us a mail on editor@personalfinance201.com

?

Please Search Here for more stories of your interest. Thanks.

Subscribe to our feed and get updates in your email inbox Send your feedback and any questions to editor@personalfinance201.com. Thanks.

Source: http://personalfinance201.com/Product-Review/lics-jeevan-vriddhi-a-review.html

miranda kerr occupy la adriana lima victoria secret angels fox 4 fox 4 vs fashion show 2011