LIC is the pioneer insurance institution of India. LIC Jeevan Labh Policy is one of the most popular and best-selling endowment policies of Life Insurance Corporation. It is LIC table no 836, traditional endowment policy launched on 22nd Dec 2015.
It is a simple endowment life insurance plan which is limited premium paying, non-market linked and with-profits. It is a traditional plan that offers both a life insurance plan and a decent investment opportunity.
This plan is offering both death benefits as well as maturity benefits which are increased by the bonus out of profit participation. One can enter this plan anytime between 8 to 59 years.
|Policy Name||LIC Jeevan Labh|
|Policy Type||Traditional Endowment Policy|
|Polic Details||Table No. 836|
|Launched Date||22nd December 2015|
Benefits of LIC Jeevan Labh Policy
The LIC Jeevan Labh Plan offers a below-mentioned bouquet of benefits:
- Death benefit: Although the loss of any near one is irreparable but life insurance helps to cope up with the financial stress after the demise of the bread earner of the family. In the event of the death of the policyholder, his/her nominee is paid the sum assured, simple reversionary bonus as well final additional bonus if applicable.
- Maturity benefit: Insurance policies though primarily conceptualized to secure the dependents in case of death of the earning member but with time it has been also used as an alternative investment option. After completion of the policy term, the insured is entitled to receive the sum assured which shall be more than 105% of the premium paid, and being a participating policy it also gives you the simple reversionary bonus and final additional bonus while being a non-linked policy it keeps your returns safe and unexposed to market fluctuations.
- Rebate: Another great feature offered by LIC is the rebate. Rebate is given on the basis of premium payment frequency mode and amount of sum insured. By carefully planning, one can be entitled to a maximum rebate of 3.75% of the total premium paid. This feature is discussed in detail in the latter part of the article.
- Loans: After completion of the 3 years of the policy period where premiums are regularly paid, and surrender value is generated, you become eligible for applying for a loan against the policy.
- Non-Linked Profit participation: Being non-linked policy your investment is safe from the ups and downs of the equity market while at the same time being a participating policy you get the benefit of surplus earned by LIC. Thus it is a dual benefit.
- Suitability: These kinds of plans are very much suitable for your anticipated long term financial goals like building your dream house, higher education of children or a lavish marriage arrangement. You save steadily from your regular income for a planned financial need.
- Tax benefits: Tax benefits increase the importance of insurance plans as a better investment over others. Especially for HNIs who are in the highest tax brackets, investment with tax-free returns can be great. Dual tax benefits are available for LIC Jeevan Labh Policy. You get section 80C deduction for the premiums paid towards the policy and 10(10D) exemption on the income received at the time of maturity.
Eligibility Criteria for LIC Jeevan Labh Plan
- Entry Age-Minimum age is 8 completed years. Maximum Age depends on the policy term. For 16-year policy term, the maximum entry age is 59, which gets lowered to 54 years if the policy term is of 21 years and further reduces to 50 years if the policy term is 25 years.
- Sum Assured- the minimum sum assured is Rs 2 Lakh (illustration given) and no limit for maximum sum assured
|Age (In Years)||Minimum: 8 Years (Completed)
Maximum: 59 Years ( For the Policy Term of 16 Years )
54 Years ( For the Policy Term of 21 Years )
50 Years ( For the Policy Term of 25 Years )
|Sum Assured (INR)||Minimum: 2,00,000
Maximum: There is No Limit
|Maturity Age (In Years)||Minimum: NA
|Policy Term (In Years)||16/21/25 Years|
Key features of the LIC Jeevan Labh Plan are explained below
- It provides an option to decide your policy term from keeping it as short as 16 years or as long as 25 years. A mid option of 21 years is also available.
- This plan is non-linked. Non-linked means that return on investments shall not be exposed to market fluctuations unlike ULIPs (Unit-linked Insurance Plans).
- Limited premium paying term-you don’t need to pay premium till maturity. Although your premium payment shall be stopped but your insurance coverage shall be continued.
- Only individuals can take this plan. Means no other Artificial Judicial Person, Company, Firm, LLP, Association of Persons, Body of Individuals, HUF can take this policy for them or any member.
- You can choose to pay premium paying terms from 10 years, 15 years or 16 years depending upon your policy duration.
- Like for any other policy, there is an option to decide premium payment frequency of either annually, bi-annually, quarterly and even monthly.
- If the policy has reached a surrender value, and premiums are paid for 3 years regularly, then you also get a loan facility over the policy.
- Since it is a participating plan, you are also entitled to receive the bonus at the maturity in excess to the guaranteed sum.
- There is a free look period of 15 days is offered from the date of issue of policy. Means if you aren’t satisfied with the policy terms, you are entitled to claim the premium paid and get the insurance canceled.
- In case there is default in premium paying and you wish you revive the policy then LIC offers it for 2 years of revival period from the date of first default of premium payment. Revival is subject to payment of all the arrears, interest and any other expense.
- LIC provides you a grace period of 30 days from the due date of premium to pay the premium. This 30 day becomes 15 days if your premium payment frequency is monthly.
- Suicide-If insured commits suicide within 1 year of the policy, no payout shall be made. If suicide is committed after 1 year, 80% of the premium paid is returned to nominee without any interest thereupon.
- There is a great range for entry age for this policy from as young as 8 years to as old as 59 years.
Modus Operandi of LIC Jeevan Labh Policy
When applying for the LIC Jeevan Labh Plan, the proposed policyholder has to decide the following:
- Sum Assured (The amount of coverage to be provided)
- Policy Term (Total period for which the coverage needs to be extended).
The premium payment term is decided on the basis of the policy term chosen as below:
- If the policy term chosen is 16 years, then premium shall be paid for 10 years
- If the policy term chosen is 21 years, then premium shall be paid for 15 years
- If the policy term chosen is 25 years, then premium shall be paid for 16 years
Amount of your annual premium shall be decided on the basis of the above two factors as well as the age of insured at which he or she enters the plan.
At maturity/death, apart from the sum assured you/nominee also receive Simple Reversionary Bonus and Final Addition Bonus as the type of policy is profit-participating. However, the amount of bonus cannot be known in advance. It is declared by the LIC.
Now to understand the calculations for LIC Jeevan Labh plan, we shall take an example of Mr. Udit Gupta aged 35 years.
He opts the below options-
Sum Assured: Rs 2 Lakhs (minimum)
Policy term: 25 Years. (maximum)
Policy term being 25 years, the premium shall be paid for 16 years.
Based on age, the sum assured and premium payment terms, his annual premium shall be Rs 9,290 plus GST. Assuming GST @ 4.5%, his final premium comes out to be Rs 9,708.
Now, there can be 3 scenarios-
- Udit dies before completion of premium payment term and nominee receives the death benefit
- Udit dies after completion of premium payment term but before total policy term and nominee receives the death benefit
- Udit Survives the policy term and receives the maturity benefit himself
Let’s discuss each one by one-
Scenario 1– Udit dies before completion of premium payment term and nominee receives the death benefit- He dies after paying 3 premiums.
Total premiums paid by Udit- Rs 29,124 (Rs 9,708 X 3 years)
Receipt by Nominee-
|Sum Assured||INR 2,00,000|
|Simple reversionary bonus (Rs 40 per 1000 sum assured per year-assumed)||24,000 (40 X 200 X 3)|
Scenario 2– Udit dies after completion of premium payment term but before total policy term and nominee receives the death benefit- He dies after paying 15 premiums.
Total premiums paid by Udit- Rs 1,45,620 (Rs 9,708 X 15 years)
Receipt by Nominee-
|Sum Assured||INR 2,00,000|
|Simple reversionary bonus (Rs 40 per 1000 sum assured per year-assumed)||1,20,000 (40 X 200 X 15)|
Scenario 3– Udit Survives the policy term and received the maturity benefit himself-received maturity benefit himself at the end of 25th Year.
Total premiums paid by Udit- Rs 1,55,328 (Rs 9,708 X 16 years)
Receipt by Udit (Insured)-
|Sum Assured||INR 2,00,000|
|Simple reversionary bonus (Rs 40 per 1000 sum assured per year-assumed)||
Note: Simple reversionary bonus and final addition bonus figures are imaginary for calculation sake, actual may vary. Rebate due to annual premium payment mode is ignored for calculation ease.
LIC Jeevan Labh Riders
There are few riders available with this plan which can enhance your base plan by paying a minimal fee for the rider. Let’s understand these riders-
- Disability benefit rider- if you are aged above 18 years, then by payment of additional rider premium, you can get comprehensively covered for death as well as disability. Disability can be more painful and financially straining for the nominee than the death of the insured. Thus it’s a great option to take coverage for disability as well and mitigate the risk.
- New Term Assurance rider-Yet another brilliantly designed rider by the LIC Jeevan Labh Plan. This rider ensures comprehensive financial protection to the nominee of the policyholder along with the investment opportunity this plan offers. This rider gives an option of term insurance which means if insured is died before the expiry of policy term; nominee receives the sum assured decided for the rider along with all other benefits of death. However, the maximum sum assured available with this rider is Rs 25 Lakhs.
LIC Jeevan Labh Surrender Value
Surrender Value is achieved by this policy if the policy premiums are paid continuously for 3 years without fail and policy was in an active state during those 3 years.
There are 2 types of surrender value- (i) Guaranteed surrender value and (ii) Special Surrender Value
- Calculation of Guaranteed Surrender value: A percentage decided on the basis of the number of years premiums are paid, year of surrender and the term of the plan. This percentage is applied to the total premiums paid till surrender and that is the Guaranteed Surrender Value. Premium should be without tax and excluding premium for any rider. This also takes a simple reversionary bonus in the account.
- Calculation of Special Surrender value: It is calculated by discounting the total of vested bonuses and the maturity paid-up sum assured by an appropriate discounting rate. This surrender value is however paid only when it is in excess of guaranteed surrender value.
LIC Jeevan Labh Premium and Sum Assured Rebates
Along with the benefits attached to the policy, LIC also gives some other rebates to its policy-holders like-
- Premium rebate- this rebate is given on the basis of the mode of the frequency of the premium payment. This rebate is given as below-
- Rebate equal to 2% of the value of table premium is given to those who opt for yearly premium mode
- Rebate equal to 1% of the value of table premium is given to those who opt for half-yearly premium mode
- Sum Assured rebate- a three-tier slab model for sum assured rebate is being given by the LIC to insured to choose from-
- Rebate equal to 1.25% of the basic sum assured per Rs 10,000 of basic sum assured if the sum assured is between Rs 5,00,000 to Rs 9,90,000.
- Rebate equal to 1.50% of the basic sum assured per Rs 10,000 of basic sum assured if the sum assured is between Rs 10,00,000 to Rs 14,90,000.
- Rebate equal to 1.75% of the basic sum assured per Rs 10,000 of basic sum assured if the sum assured is above Rs 15,00,000.
By choosing the annual mode of payment of premium and a sum assured above 15 lakh, you shall be able to avail a rebate of 3.75% (1.75% sum assured rebate and 2% premium mode rebate).
LIC Jeevan Labh Policy by LIC of India if not only offering a comprehensive life and disability cover to the policyholder but it is also a very lucrative investment and a long horizon saving plan for those who are looking for safe and tax-free returns as it is both non-linked and profit-participating plan. Thus it can be a good option for the most.
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