Discussing the best LIC plans for the young population in India starts with the LIC Jeevan Labh policy, which is a LIC Endowment plan. It meets this policy offers both needs for life coverage and lump sum savings under a single investment plan.
When a young person is signing up for LIC, she/he will certainly consider the insurance angle, because if the insurance facility is not very lucrative and only the saving plan is good, then LIC will not be a good choice. For saving money, systematically or randomly, there are numbers of other plans in the FD, bond or equity, and mutual fund segments. Also, the tax savings factor is another point to look out for under LIC plans. So, here GoodReturns will discuss why is the LIC Jeevan Labh plan is popular among the young demographic of India, keeping in mind the insurance coverage and maturity benefits.
LIC’s Jeevan Labh policy
The LIC Jeevan Labh, a limited premium paying, and non-linked investment policy is a preferred choice because of its flexibility of payment and long-term insurance coverage. This policy’s premium paying term (PPT) is distinguished into 3 options, – 10 years, 15 years, and 16 years with total term periods of 16 years, 21 years, and 25 years, respectively. That means if one is paying the premium (as PPT) for 10 years, the total term period with insurance coverage will be active for 16 years. Similarly, with 15 years of PPT, the policy will be active for 21 years, and with 16 years of PPT, the policy will be active for 25 years. To get the utmost return from LIC from this plan, paying the full premium in the PPT is suggested.
The minimum entry age of this policy is 8 years completed and the maximum entry age is 59 years, with a maximum maturity age of 75 years. The minimum sum assured of the total amount payable within the PPT is Rs. 2,00,000 with no upper limit depending on the income levels. This plan takes care of liquidity needs through its loan facility.
Benefits on death
If the subscriber dies within the total term, the nominee will get the paid premium with the insurance coverage. In case of accidental death, the insurance coverage is double the natural death coverage amount. LIC states that in case of death during the policy term, provided all due premiums have been paid, death benefit, defined as – the sum of Sum Assured on Death, vested Simple Reversionary Bonuses and Final Additional Bonus, if any, shall be payable. Sum Assured on Death is defined as the higher of 7 times of annualized premium or Absolute amount assured to be paid on death, that is the Basic Sum Assured. However, this death benefit shall not be less than 105% of all the premiums paid as of the date of death. These premiums do not include any taxes.
Benefits on maturity
The maturity benefit of this plan is quite lucrative than any other plan offered by LIC. Sum Assured on Maturity is equal to the Basic Sum Assured, along with vested Simple Reversionary bonuses and Final Additional bonus (if any) will be paid by LIC in a lump sum on survival to the end of the policy term. However, all due premiums should be paid within the PPT. In the 1st year the premium will attract 4.5% tax, from the second year till last, it will attract only 2.25% tax.
Here are 3 calculation charts, that will show approximate premium amounts with different possible sum assured, their maturity and death benefits – with 3 different terms and PPT (entry age 30).
Chart 1: Jeevan Labh premium and maturity chart (25 years term, 16 years PPT)
| Sum assured (INR) | 1st year premium (yearly) | From 2nd year premium (yearly) | Death-sum assured | Basis sum assured | Approximate Return at the time of maturity |
|---|---|---|---|---|---|
| 200000 | 9817 | 9605 | 200000 | 200000 | 525000 |
| 400000 | 19632 | 19210 | 400000 | 400000 | 1050000 |
| 600000 | 28665 | 28048 | 600000 | 600000 | 1575000 |
| 1000000 | 47514 | 46491 | 1000000 | 1000000 | 2625000 |
Chart 2: Jeevan Labh premium and maturity chart (21 years term, 15 years PPT)
| Sum assured (INR) | 1st year premium (yearly) | From 2nd year premium (yearly) | Death-sum assured | Basis sum assured | Approximate Return at the time of maturity |
|---|---|---|---|---|---|
| 200000 | 11516 | 11268 | 200000 | 200000 | 404800 |
| 400000 | 23032 | 22536 | 400000 | 400000 | 809600 |
| 600000 | 33765 | 33038 | 600000 | 600000 | 1214400 |
| 1000000 | 56013 | 54807 | 1000000 | 1000000 | 2024000 |
Chart 3: Jeevan Labh premium and maturity chart (16 years term, 10 years PPT)
| Sum assured (INR) | 1st year premium (yearly) | From 2nd year premium (yearly) | Death-sum assured | Basis sum assured | Approximate Return at the time of maturity |
|---|---|---|---|---|---|
| 200000 | 17805 | 17421 | 200000 | 200000 | 333000 |
| 400000 | 35609 | 34843 | 400000 | 400000 | 666000 |
| 600000 | 52630 | 51497 | 600000 | 600000 | 999000 |
| 1000000 | 87456 | 85573 | 1000000 | 1000000 | 1665000 |
These calculations have been done by GoodReturns, through the ‘All in one CALC’ mobile application, available in the android play store. An investor can check LIC’s all plans and their benefits from anywhere through this particular mobile application if interested to explore other LIC plans.
This chart calculation clearly shows why this term policy is popular among the young population – because of its lucrative lump sum amount at the time of maturity. Premium paid under this plan will be eligible for a tax rebate, under section 80c. If the subscriber is in his/her 30s, the 25 years policy will be over at the age of 55. At that old age, this lump sum will help to secure the rest of the life, while even after the end of PPT, the insurance coverage will be active. In case of death, the nominee will receive the money with sum and coverage. The life insurance angle is a very significant point for signing up under LIC plans. However, with a lower or young entry age, the chance of death is eventually lower. So, the lump sum will be like a good systematic saving for the subscriber. Maturity under this plan will be free from income tax, under section 10(10D).
As a note: either the investor can choose the ’25 years term, 16 years PPT’ option or the ’16 years term, 10 years PPT’ option. The middle segment, in terms of better benefits, can be easily replaced by the 16 years PPT option.
