LIC Jeevan Vriddhi Review – Think Twice

We are in the last month of Financial Year 2012, and once again LIC has come up with a new plan with name LIC Jeevan Vriddhi. And once again just with the announcement of launch queries are raining.

  • “I want to know your opinion (merits and demerits) on Jeevan Vriddhi launched by LIC. I will be really grateful to you for your reply.” Mayank
  • “What about LIC Jeevan Vridhi, can I invest some amount in that?” Vishal

I don’t understand that why people get so curious about products launched by LIC. Even if the product with different name and with different company is already there in the market, but if LIC has come up with it then people feel “there must be something special”. And moreover when a product by LIC comes up with a word called “GUARANTEED”, excitement gets doubled – limited period offer always excites people so this will LIC Jeevan Vriddhi will be closed before 31st May 2012. Let’s see how this plan looks like & should you put your hard earned money in it. ReadWhat is Insurance?

Jeevan Vriddhi LIC Jeevan Vriddhi Review   Think Twice

LIC Jeevan Vriddhi Plan – Review

LIC Jeevan vraddhi is a single premium payment plan which offers a guaranteed maturity amount plus Loyalty additions if any at the time of maturity. The insurance cover would be 5 times of the premium amount. (Review of LIC Jeevan Ankur)

Basic Features of LIC Jeevan Vriddhi

  • Person between age group of 8-50 years can apply for this plan.
  • Minimum Premium Rs 30,000/- thus minimum sum assured would be Rs 1,50,000/-
  • There’s no cap on maximum premium payment.
  • Policy term is 10 years , but this policy can be surrendered after 1 year.

Other benefits of Jeevan Vriddhi

The major feature of this policy is that it offers guaranteed maturity benefit which depends on the age at the entry and premium paid at the time of purchasing the policy plus

The loyalty additions if any which depends on the corporations experience with the policy. Also the rate and terms will be declared by the corporation, that too at the time of maturity.

INCENTIVE FOR HIGHER PREMIUM in LIC Jeevan Vriddhi

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

LIC Jeevan Vriddhi Premium LIC Jeevan Vriddhi Review   Think Twice

Tax benefits on Jeevan Vriddhi LIC

As the sum assured is 5 times the annual premium , so right away as per current income tax laws the policy gets eligible for Section 80C benefit and also the maturity will be tax free as per Section 10(10)d. (Read Year End Tax Planning Guide)

Let’s do some MATHS – LIC Jeevan Vriddhi Policy?

Certainly on the face of it LIC Jeevan Vriddhi looks quite attractive, but when it’s a question of finances one should be double careful. Let’s see what guarantee they are actually offering. I am sure that you are interested in guaranteed maturity benefit and not in the loyalty additions which may or may not be declared. Below is the illustrative chart as on the website of LIC which clearly shows the guaranteed maturity value one will get by investing Rs 1000/- in this plan. I have added 2 more columns just to get the actual premium outgo after adding Service tax and what would be the annualised yield at the time of Maturity.

The above table clearly shows that like any other endowment policy, this plan also is generating return in the range of 4%-7%.

Now let’s look at the illustration which shows the variable part also, i.e. loyalty additions

jeevan vriddhi illustration 1 LIC Jeevan Vriddhi Review   Think Twice

The above illustration is exclusive of tax, but your premium will be inclusive of tax. So we need to calculate returns on with tax premium which comes out to be Rs 30463/- ( @1.545% service Tax). Thus with the guaranteed maturity value of Rs 58665/- the annualised return comes to 6.77% , and  with assumed variable return maturity benefit of  Rs 65998/- the annualised return coms to 8.03%.

jeevan vriddhi illustration 2 LIC Jeevan Vriddhi Review   Think Twice
In this case your Premium inclusive of tax will be Rs 101545. And annualised returns will be 6.85% Guaranteed and @ 8.12% NON Guaranteed.

Should you invest in LIC Jeevan Vriddhi

We are always of the opinion that whatever financial decision you make should support the overall financial goals and thus for the betterment of Finances. You should always keep 3 points in mind before  zeroing onto any policy

1. There should be a proper reason attached to any of your financial product purchase.

You may want to attach reason for doing tax saving or investment with this product. If you invest in this for tax saving then the annualised return will improve as the net outflow from your side will be less, but this product is not looking suitable for investment purpose as the returns are just at par with average inflation rate. Even if talk about insurance it’s just 5 times of premium.

2. Besides return you should also be aware of the risks associated.

  • Inflation risk. As this product is not offering that much return which can beat inflation.
  • Taxation risk: Pls keep in mind that the proposed Direct tax code provisions of taking  sum assured equals to at least 20 times the annual premium , only then that policy will be non-taxable at the time of maturity. As the DTC is yet to be announced and this policy has 10 years term so ambiguity is still there.
  • Opportunity Risk: 10 years is a very long time. You may get very good returns if you invest in equity related instruments for this much time frame. If you or your advisor knows how to invest in duration funds then you can take advantage of debt funds also. (Read – Types of Risk)

3. You should be aware of all the alternatives to decide better

There is alternative for everything like for tax saving there are many other options available like ELSS, 5 year fixed deposit, National savings certificate etc., for investments also there are many options and even in this policy category (guaranteed maturity benefit) there are many options like ICICI I Assure single plan, Birla sun life Rainbow fund, Bajaj Allianz guaranteed maturity investment etc. My advice is not to mix investment with insurance.

I hope I have empowered you with enough calculations, reasons to invest or reject LIC Jeevan Vriddhi. Now better take informed decision and that too for the betterment of your finances.

Review of LIC Jeevan Vriddhi is done by Manikaran Singal, CERTIFIED FINANCIAL PLANNERCM - the views expressed herein are the author’s personal views.

If you have any questions related to LIC Jeevan Vriddhi or any other life insurance policy – feel free to add it in comment section.

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{ 257 comments… add one }

  • Hemant Beniwal March 3, 2012, 10:06 AM

    Dear Readers,
    It will be interesting to see how this change will impact LIC Jeevan Vriddhi
    “Budget 2012-2013 has tightened the eligibility criteria for life insurance policies to qualify for benefits u/s 80C and 10(10)d. Now only those insurance policies where the premium paid does not exceed 10% of the capital sum assured will qualify for such deductions. This condition applies to policies purchased after 1 april ’12″
    Added on March 18th 2012

    • Gaurav June 29, 2012, 2:18 PM

      I’ve been offered to invest in ICIC GSIP, the guaranteed sum assured it Rs. 2,10,000 (excluding some bonuses and maturity benefits) for a yearly premium of 30,000. Does it qualify for tax deductions.?? Is there is any benefit of such policy.
      Im also considering Reliance guaranteed money back plan.

      Kindly, let me know should I go for such policies for tax saving purpose.

  • Hemant Beniwal March 3, 2012, 10:16 AM

    Hi Manikaran,
    Thanks for sharing detailed review of LIC Jeevan Vriddhi for TFL Readers.
    I would like to share yesterday’s tweet by Monica Halan, Editor Mint Money (Hindustan Times).
    ONGC and LIC
    I think there is a big point in this short message – if people really want to understand….

    • Manikaran Singal March 5, 2012, 9:57 AM

      Thanks hemant for allowing me to write for your readers.
      Though i feel that readers of your blog comes under “The Financial Literates” category, and launching of new products doesn’t bother those who have done there financial planning in a proper way. But still products like this creates so much curiosity among general public, that many times they gets ready to compromise the planned finances.
      There’s nothing good or bad in any product, but what matters is its suitability to your finances .
      So i have just tried to help people take informed decision.

      • Hemant Beniwal March 5, 2012, 10:53 AM

        Thanks Manikaran,
        I will also appreciate if you can reply to all queries on this post.
        Thanks in advance :)

      • Anil March 11, 2012, 7:10 PM

        Dear Manikaran,

        Please don’t compare debt product returns with equity returns as you said for 10yrs time frame one should invest in equity market.

        I have some basic questions,

        1) Do you think that people doesn’t need secure returns for their hard earn money? I think, All people are not risk takers that’s why whenever their MF SIP investments gives negative returns, many people want to exit from it asap, even though they know if they can stay invested they can earn good returns, that’s why we saw more redemptions when market crashed in 2008.

        2) In LIC’s Jeevan Vruddhi you are saying returns are not even beats the basic inflation. Please tell me one debt product which can beat the inflation guaranteed? Do you have any such product in the market? LIC plan gives you 7 to 8% guaranteed tax free returns plus loyalty additions if any, do you think it’s not good enough from a debt product? Currently only PPF is better than this policy but without Life Cover and there is no guaranteed that the interest rate which is today will stay for 10 yrs. Does anybody or Govt. can give guarantee for PPF rates?

        3) Why always LIC manage to achieve their targets with these types of products? Why informed people also bought these policies from LIC? What is the reason behind it?

        A CFP always tell people that endowment policies giving less returns for long term than equity market and it’s true, but one should not compare debt product to equity product it’s not reasonable. And if you remove the insurance cost like mortality charges and other charges and if you calculated yield on your net investment you will find that the LIC’s endowment plans gives better Tax Free long term returns than any other debt product in the market. As you know all other debt products except PPF are taxable, then why not an endowment plan which have good returns and risk cover combine in one product? One should always do asset allocation but should not ignore endowment plan because it’s make your savings habit and gives you tax-free returns with protection.

        • chetan March 12, 2012, 8:25 PM

          well said anil , on one hand Manikaran is saying do not mix insurance and investment and on other hand he is suggesting ICICI I Assure single plan, Birla sun life Rainbow fund, Bajaj Allianz guaranteed maturity investment etc, contradicting his own statement

          • Manikaran Singal March 13, 2012, 11:06 AM

            Chetan, you should write that one one side Manikaran is giving alternatiives but at the end he’s specifically advised “don’t mix investments with insurance”

            Alternatives are half part of my 3rd suggestion while someone is going to chose a product and which is in continuation with the other 2 advises which are giving reasons to investment and understanding risk. Please read in continuation , then you will understand that what i am saying is quite right.

        • Manikaran Singal March 13, 2012, 10:49 AM

          Anil, Nowhere in the article i have written that for 10 years timeframe one should invest in the equity products. I request you to read the article again. What i have mentioned is ” one may get good returns if one invest in equity for this much time frame”…along with that i have specifically mentioned that if one knows how debt funds work or if one’s advisor knows how to make use of durations than again one can make good returns. Asset allocation and rebalancing can only happen in the case where the investments are flexible. If we talk about investments then it should be into that product which is with least expenses and more flexibility. If the investment need of a client is of 2-3 years, then i may not recommed any equity linked product, but yes if the horizon of 10 years then one should definitely include equity in the portfolio.
          People have withdrawn there MF SIPs in 2008 was because of uninformed decision they took while investing. Moreover for general investor, mutual fund is about equity investment only. Slowly they are coming to know that MF is just an investment vehicle which make them invest in many asset classes. One can design a good and stable portfolio as per one’s risk and taxation profile by combining different asset classes ( Equity, debt, gold) through mutual funds. and If one keep insurance and investments seperate , and use insurance products for sum assured and investment products for generating optimal returns than one can achieve the financial goals more comfortably. You yourself admit that PPF is among the suitable debt product available.
          These days interest rates are at peak, and so many interest bearing instrumenst are offering good rates. If you have a flare towards investment products then you may very well check that 1 year bank CDs are coming in the range of 10.20% – 10.40%.
          But If i want people to take informed decisions then as i have written in the article that one should be aware of the taxation aspects, other opportunities and risk associated.
          I also agree with yu that if i exclude the insurance part and other charges then the returns on this product will improve and more suitable for investors , who are actually seeking returns…but this is not the case in this. That’s why for return seekers we advise investment products and for insurance seekers we advise insurance products.

    • arun March 13, 2012, 11:37 PM

      Franklin Templeton buys big in ONGC auction
      Franklin Templeton Investment Funds (FTIF), a foreign institutional investor (FII), could emerge as the second significant investor in the auction of Oil and Natural Gas Corporation (ONGC) shares by the Union government two weeks ago.
      FTIF’s holding crossed one per cent, according to a company filing late on Monday, suggesting the fund bought a significant number of shares in the government’s auction last week. FTIF holds 90.93 million shares or 1.06 per cent in ONGC as on March 9, 2012, according to the filing dated March

      • Hemant Beniwal March 14, 2012, 6:04 AM

        Hi Arun,
        13.75 million shares by FT and 377 million shares by LIC – what we are comparing.

      • amit seth March 16, 2012, 10:10 PM

        well Mr. Arun,
        LIC is holding 9.8% share of ONGC. more than any body else.

    • Sujata Gupta March 22, 2012, 11:20 AM

      Hello Hemant,
      Really thankful to you. I was keen to take the policy but after reading your advise, I will rethink twice, thrice.
      Sujata

      • Deepak Bhavnani March 28, 2012, 9:09 PM

        Hi! Ms Sujata Gupta,
        Pl do think and decide whether to buy LIC’s Jeevan Vriddhi because it is always good to take a decision after carefully thinking. But let me tell you that this product of Lic has got everything i.e good returns,life insurance cover, tax benefits and highest safety in the form of govt guarantee.Returns after deducting mortality charges and considering the tax-benefits rerurns come out to be better than those of an bank FD with 9.25 % int rate. Then why will it not beat the inflation? Also, the proposed changes because of the DTC are expected to be with prospective effect. Even the changes announced in the budget of 10 times cover for tax benefit will be with effect from 1.4.2012. Those who buy before 31st march will not be affected.

        • BasuNivesh March 29, 2012, 8:51 AM

          Deepak-Jeevan Vriddhi good returns? when normal 10 yr NSC (Interest rate 8.90%) is giving 9.09% effective rate of return (Revised rate of interest from 1st April 2012) then how it can be a good return? Life Insurance Cover-I mentioned about the Jeevan Vriddhi life insurance cover in below comment where I tried to reply to Harikrishna, you may refer my reply for that. Highest Security-NSC and Bank FDs less secured? Even if you invest in NSC you will get the tax exemption right? So I am saying the same thing to Sujata Gupta what you told “Pl do think and decide whether to buy LIC’s Jeevan Vriddhi because it is always good to take a decision after carefully thinking”. I will recommend to invest some portion of your portfolio into this plan if you are so fond of LIC, but not whole.

          • Deepak Bhavnani March 30, 2012, 12:03 AM

            Dear BasuNivesh,

            NSC will give you the tax rebate not tax free maturity.Today people are not bothered of the tax rebate because they are thru with the one lakh limit by investing in their PF contribution or repayment of housing loan principal or by paying their children school fees. The most attractive thing about jeevan vriddhi is the tax free maturity.A person saves from 10 to 30% of his interest income which would have otherwise gone by way of income-tax. This increases your nett-in-hand return substancially which is very important for high income group people. No other debt instrument other than life insurance policies has got that except PPF. But PPF will not have life cover,rate of interest is not fixed and there is a ceiling of 70,000 or 1,00,000 investment p.a. Hope you agree on this point -Deepak

            • BasuNivesh March 30, 2012, 11:31 AM

              Deepak-I agree NSC will give tax rebate during the time of investment. But you can show the next years interest income under the head of “Income from Other Source” and claim it as re-invested to get the benefit of Section 80C. Currently for 5yr NSC till 4th year interest you can use this facility for reducing your tax liability of maturity (About 10 Yr NSC not have any clear picture). Where is the tax free maturity when your premium is more than is more than 10% of SA (From this budget)? About investing in such product read my conversation with Manikaran below. I am not against LIC or Jeevan Vriddhi. But it is foolishness to invest all the money in such low return product. Investors need to diversify according to his goals. If his whole investment is in such low yielding product then what will be the impact of inflation on his financial life? We need to seriously think before judging about the product and recommendations. Hope you agree with my point.

              • Deepak Bhavnani April 1, 2012, 12:33 AM

                Dear BasuNivesh,
                In your comment you are again talking of the Tax rebate i.e sec 80c. As I mentioned earlier people nowadays cover their one lakh investment in sec 80c by way of PF,PPF,school fees,housing loan etc. The interest is taxfree maturity and when we were talking 31st march was not over. The new budget provisions had not come into effect.They will come into effect only after the loksabha clears the buget proposals.

                • Narendra Babu S June 26, 2012, 8:33 PM

                  Dear Deepak,
                  Your comments are exactly what an insurance agent is expected to say, rather LIC agent. If you are looking at tax benefit under sec 10(10)D, equity mutual funds invested for over 366 days will also qualify for 10(10)D benefit. There are other debt and FMP options available in MFs which give double indexation benefit which will be also not taxed on redemptio/maturity. Insurance industry as such in India is still a long way to mature. Insurance for the sake of Insurance is the right thing to do. All insurance companies irrespective have started focusing on traditional plans which are not at all transperent (I would rate ULIPs far better in this aspect) so that they can shore up better performances at the cost of investor. If at all IRDA has to really act as a development authority, they should bring in strict rules against sale of such policies where the customer is not being given a fair deal. Please educate yourself with the financial markets and options of investments available in the market, study them and understand what the customer requirements are and then suggest a proper solution. Do not think insurance is the solution for all requirements. I really pity the customers who go for such traditional insurance savings plans. Jago India Jago. Ignorance is not bliss when it comes to money.

                  To all the investors out there, “IT IS YOUR MONEY. YOUR HARD EARNED MONEY. MAKE INFORMED DECISIONS. INSURANCE IS NOT AN INVESTMENT. HAVE TRUST WORTHY ADVISOR. IT IS WORTH PAYING FEES OF AN ADVISOR THAN TAKING AN INSURANCE POLICY WHICH IS NOT SUITABLE AND MAKING THE AGENT EARN THE 30-40% IN COMMISSIONS.”

                  HAPPY TO ANSWER ANY QUESTIONS OR COMMENTS

                  Narendra Babu S

    • KAUSHIK April 4, 2012, 1:40 AM

      DEAR MADAM, SORRY, IF U OWN AN ENDOWMENT POLICY OF LIC(TABLE 14,PREMIUM Rs.4889.00 YLY) OF 100000S.A. AT THE AGE 35YRS OF21YRS TERM THEN U GET 100000S.A.+Rs.100800.00 BONUS ASPER PRESENT VALUATION+Rs.5000.00FAB,THE TOTAL RETURN WILL BE RS.205800.00 ON MATURITY! IRR IS 6%.

  • tonyg March 3, 2012, 11:02 AM

    Hi Hemanji,
    I was really wondering about this LIC policy this morning, so happy to see your article
    I still cannot undertsand why people still feel insurance is an investment?
    Thank for making us SMART, it was your article that really worked for me.
    Regards

    • Manikaran Singal March 5, 2012, 10:02 AM

      Thanks tonyg
      Good to know that you don’t feel insurance as an investment.
      Keep spreading the word, and help us in making more and more people financially literate.

      • Rupali Jaiswal March 9, 2012, 2:18 PM

        hello sir.
        earliar i thought only insurance and money market instruments are safe.but having gone through ur article..i m now completely careful..and sharing it with others!!thanks a lot..fantastic job..done by you.

  • Hussain Namakwala March 3, 2012, 11:42 AM

    Hii Manisir
    Awesome work done by you sir. Again LIC had launched a plan in march end and moreover it is only open for a short period. But as we look at the guaranteed maturity benefits it is only at par with the inflation rate. So if nothing happen to me in 10 years than i will only get 58,665 plus the loyalty additions comes around 7,300 which are non-guaranteed. So it is bad for investment but for life cover it is somehow good.

    Regards
    Hussain Namakwala

    • Vivek K March 3, 2012, 11:11 PM

      Why do you say it is good for life cover?

    • Tejas Shah March 4, 2012, 3:19 PM

      Dear sir

      you have given your opinion in brief but i would like to inform you Lic’s sum insured and declared bonus both are guaranteed by central goverment of india u/s 37 of lic act this guaranteed is only with lic not private players.

      Every body knows lic is very loyal in the terms of death claim settelment. also offering 7% for 10 years means your money will grow compound for 10 years you can not compare this product with equity or any mutual fund. every investor has a temption to encash mony before maturity in such case money will not grow as per my opinion there are few people who hold their mutual fund for 10 years. or continue their sip for 10 years

      In past Lic has introduce jeevan dhara plan no 96 guranteed returns of 12 % life long even today policy holder enjoy such excellent return.

      As per my opinion every people must park their some amount in the risk free and tax free return. just like long term endowment plan, ppf , tax free bond etc.

      • Sunil Verma March 5, 2012, 8:58 AM

        Hi Tejas,
        I totally agree with u

      • Manikaran Singal March 5, 2012, 10:53 AM

        Tejas
        Just to add here. that recently there’s been a small amendment done is section 37, which reads as follows:

        “In Section 37 of the principal Act, for the words “by the Central Government”, the words “to the extent as the Central government may, by order, from time to time, determine” shall be substituted”

        To make it more comprehendable , ministry of finance issued an explanation to it which says:
        “Section 37 of the LIC Act, 1956 provides for guarantee of the Central Government to the payment in cash of the sum assured in the policies including bonuses issued by LIC. However, no monetary value is assigned to the Government guarantees. Government has taken a view that it will not discontinue the Government guarantee assigned to the policies including bonuses issued by LIC but will keep the flexibility of determining the extent
        of Government guarantee from time to time.”
        Banking and Insurance are 2 pillars of an economy, so no government ever wants any of this go bust.
        The point here is not to prove you wrong or i am against any LIC product. I just want to say that investor should understand his/her requirement first and then enter into any product. I am perfectly fine if someone has a trust in LIC and is even ready to pay extra premium to get adequate insurance coverage under LIC term plan. But for investments, one should be very cautious

        I also agree with you that investors don’t continue with mutual funds like investment for long and withdraw the investments much early, but that doesn’t mean that we make them invest in a product which gives return just equal to inflation rate. Its high time for people to get financially educated and take informed and planned decisions

        • chetan March 12, 2012, 8:30 PM

          “I am perfectly fine if someone has a trust in LIC and is even ready to pay extra premium to get adequate insurance coverage under LIC term plan”, as said by mr Manikaran Singal clearly shows that you are against LIC.

      • kaushik March 6, 2012, 6:37 PM

        Respected shri Tejas Shah,
        I 100% Agree with you. This policy is equal to jeevan dhara. And its most recommand to Plan Jeevan Vriddhi as per need.
        Other than LIC & PPF or ELSS (Non-gaurantted) will be taxable.
        My question is, (1)How many people or % of population of india enjoying with equity or MF returns? While Mostly indians know LIC (2) Inflation Rate & Maturity taxabllity is also consider in other investment like NSC, Bank FD, Bond Etc; (3) Its a Gauranttee by Central Gov. (4) With Tax benefit Returns is near to current Bank FD. (5) In LIC -Agent will help, other than LIC people care himself. Here are so many more positive points to invest in LIC’s Jeevan Vridhhi.

      • Debasish Ray March 9, 2012, 3:53 PM

        Dear Mr. Tejas,

        Sum Assured and Bonuses once declared become a guarantee by default for any insurance company, LIC or Private insurers alike. Now for the central Govt. guarantee you are talking about, to what extent it will be guaranteed by central Govt. is not clearly stated. Further, for private insurers, if any private insurer fails, there is a three stage protection in LI act. 1. Merger, 2. Acquisition. 3. Conversion to PSU. So, theoritically if any private insurer fails, either it will be merged or acquired by another private insurer or LIC with all its liabilities, or Govt. will acquire it. This is again kind of a Govt. guarantee and this provision is there to protect the investors.

        I have nothing against LIC, in fact I think LIC offers some of the best policies in Traditional policies segment. However, I believe insurance should not be treated as a savings or investment option. In my opinion any insurance plan other than a PURE TERM PLAN is not good for anyone. For every kind of financial planning there are better options available beyond insurance. So please do sufficient Term Insurance Plan to protect your loved ones, and for savings & investments look for other options.

      • alkesh dharamshi March 11, 2012, 12:21 PM

        hi Tejas
        m totally agree wid u. jeevan vriddhi is really best plan its also cover life with five times of invested amount no FD and Equity instruments do.

        MF or Equity products never suggested for those who wants gurranted returns without any risk.

        People should understand diffrence Btw “INSURANCE” & “INVESTMENTS” products.

    • Manikaran Singal March 5, 2012, 10:18 AM

      Hussain
      giving insurance 5 times of annual premium is a normal feature in any insurance policy. it is not new in this. also this is the basic condition required to get the Tax benefit of Section 80C and 10 (10)d
      But its always better to take adequate sum assured through a term insurance policy and then invest in a suitable instrument after understanding the risk and return parameters.

      • SAJU S R March 6, 2012, 10:14 PM

        Insurance cover of 5 times annual premium is “NOT” a normal feature in a “Single premium” plan Mr.Manikaran Singal.
        I think by giving a Guaranteed maturity amount(double the premium paid) along with 5 times AP(NOT COMMON),
        this plan is a VERY VERY GOOD as per my view.

        • Debasish Ray March 10, 2012, 10:01 AM

          Dear Saju S R,

          Even in a single premium plan if you want the maturity amount to be considered u/s 10(10)D, 5 times sum assured is a must. Otherwise, 10(10)D would not apply and the maturity amount will be taxable.

  • dd March 3, 2012, 12:50 PM

    Dear Hemant,

    I have read your article on LIC’s Jeevan Vridhi, Please explained me following points for why i should not invest in this policy?
    1) As you suggest for investment alternative like ELSS; NSC; Bank Fixed Deposit etc. Explain me that if i invested in ELSS what benefit i will received in the scenario of very high fluctuation in Share Market since 2008, as the ELSS return totaly depend upon movement of Share Market. Further can you tell me their investment pattern? Because as far as my knowledge what ever fund received in ELSS invested in Debt Instrument. I request you give me your elaborate explaination of particular ELSS fund except HDFC.
    2) If i invested in NSC can you explain tax treatment on maturity?
    3) If i invested in Bank Fixed Deposit, can you explain tax treatment of maturity?
    4) Further explain me what i have received incase of death happen from ELSS;NSC;Bank Fixed Deposit? Please do not suggest me about term insurance; SIP; investment in Mutual Fund.
    5) Which Insurance Company offered the same plan/policy like Jeevan Vridhi?

    • Vivek K March 5, 2012, 10:03 AM

      I will let Hemant answer your detailed questions but here are my 2 cents: –
      – You have got it right when you say ELSS returns are dependent on the market but where do you think LIC invests their customers money?
      – In case of death you will not receive anything even from LIC, it is your family who will receive the money. While investing in ELSS, NSC etc. make one of your family members as nominee and they will get the returns at the time of maturity.
      – For lumpsum benefits it has to be term insurance, what’s wrong with it? Why don’t you want it to be a suggestion?

      • kaushik March 6, 2012, 6:54 PM

        In case of death why will not receive anything even from LIC? In jeevan vriddhi The Sum Assured is 4 times more than invest amount will be payable to nomiee. It’s more than ELSS, NSC, Any FD Returns.

        • Manikaran Singal March 9, 2012, 10:43 AM

          Kaushik, the point vivek want to put here is that in insurance the ultimate death benefit goes to family and not to insured ( and this is the main purpose of doing Life insurance)and secondly to make your family financially more secure one should go with term insurance plan with adequate cover and for investments one can look at other alternatives.

    • Manikaran Singal March 5, 2012, 11:33 AM

      dd, i assume that you want me to answer your questions vis a vis my interpretation and alternatives mentioned in the article. Let’s go one by one:
      1. If we are talking of 10 years product than we should compare it with 10 years Return of ELSS. You are not interested in HDFC as it is among the Top performing ones, but still for readers sake i am mentioning HDFC’s returns also

      Since 5 March’2002 , HDFC Tax saver has generated CAGR of 27.19%, Franklin Templeton Tax shield has generated CAGR of 23.30% and SBI Magnum Tax gain CAGR for the same period is 15.62%
      Last 3 years average CAGR of ELSS category fund is 28% and Last 5 years CAGR 7.50% (Source Value researchonline as on 5th March2012)

      I understand that past performance is not assured( neither 10 years and not even 5 years) and there’s lot of volatility in stock market, but this is what it is. That’s why we always want people to take a long term view on equity investments and those who are not so comfortable with it should stay out of it. NOWHERE in my article i have written that one should invest in ELSS or should not invest in LIC jeeva vriddhi.
      2) NSC’s interest is Taxable. For this year 10 years NSC is available at 8.70% (Guaranteed) p.a and it is half yearly compounding product. Please do check the post tax returns as per your Tax slab
      3) Bank Fixed deposit’s interest is Taxable. You may get 10 years FD in the range of 8.75% – 9.25% (Guaranteed). Interest is quarterly compounding.Please do check the post tax returns as per your Tax slab
      4)There’s no Sum assured attached to ELSS, NSC or Bank Fixed deposit. But as you yourself has rightly pointed out ( this is not suggestion , you already knew it) the combination of TERM Insurance+SIP/Investments in Mutual funds, is the most effective combination to get the adequate sum assured and effective /good returns.
      5) somewhat similar plans i have already mentioned in the article

    • Debasish Ray March 9, 2012, 4:48 PM

      Dear Mr.dd,

      Investment planning is not done in that manner. Which product will fit you depends upon your income, expenditures, liabilities, number of dependents, your age, your long term and short term goals, your tax slab, and your risk appetite. Wheteher you are salaried or self-employed also matters.

      However, let me explain in general terms. If you are risk averse and looking for guaranteed or safe investments with all tax benefits(EEE) of a LIC, first invest one lac in PPF. If you are salaried, then exhaust the maximum permissible limit of investment in EPF. This will give you 80C and 10(10)D exemptions and much higher returns than any LIC policy. For insurance cover go for the Term Plan, the premium invested in term plan will be much less than the extra returns you will get from PPF/EPF instead of LIC.

      So, your 80C needs are over with PPF only, now if you still have funds available for investments, then look for Fixed Deposits. Presently you can get upto 9.50% (10.50% for senior citizen) in Fixed Deposits, you can also get 9.50% (10.25% for senior citizen) for Fixed Deposits upto 10 years with IDBI Bank (Nationalised Bank). If you are in lower tax slab, FD is good. If you are in highest tax slab, you may also consider several options from short & long term debt funds for tax efficiency.

      For your information, ELSS funds are basically diversified equity funds with 3 year lock-in and tax benefits. Since your 80C needs are covered with PPF/EPF, you can invest in open-ended diversified equity funds, and also in Balanced funds for lower risk. Now compare the returns for a period of 10 years or more, like the LIC policies, you will understand why equity investments are most efficient investment in long-term. Again the returns are tax-free under long-term capital gains. And why you don’t want to consider SIPs? Have you tried SIPs over a period of 10 years or more? Try it and see the returns.

      For life cover, I think you have no option other than Pure Term Plans to cover you life risk. I mean how much life cover you need to protect your family? one crore? At least 50 lacs? If you want to have such huge life cover from endowment kind of plans, how much you need to invest? Further, your life cover will end with the plan, and at that time you may not get a new life cover, as you would be old and might develop some health problem that will prevent you from getting new life cover. Even if you get one, premium will be very high.

      So, for life cover go for Term Plans, they will charge a premium similar to the mortality rate charged in a endowment or Ulip plan. No life cover comes for free. On the investment part, you will earn higher returns by investing in other options mentioned above. Do not mix insurance & investment, its a thumb rule.

    • RAVI March 10, 2012, 10:11 AM

      but what about 10(10d),which is not in other product.

  • Harish Nagpal March 3, 2012, 1:57 PM

    Grt work Add what is loyalty addition,how is it calculated it is company wise or scheme vise and what are the earlier loyalty additions declared by lic till date.But it is still better than bank fd if you are in highest tax slab .Though one can use it for tax planning : Buy it in name of all family members Claim tax free return ( You can do this policy from one year back also )In next one month now you can take loan against this policy.surrender value is 90% .All family members become guranteers and one guy whi is running business takes loan from LIC or OD from bank.Claim it as expense u/s 37(1) .;)

    • Manikaran Singal March 5, 2012, 11:49 AM

      Thanks harish

      Can you pls share some data on earlier loyalty additions declared by LIC, it will surely be helpful to our readers.
      Also i do agree with you that this product certainly looks better for the investor with highest income tax slab.
      Rest whatever you have written/advised will be helpful for business persons but if the call is for personal finance i feel that investments should be commensurate to overall financial goals.

      • Vivek K March 5, 2012, 4:24 PM

        Hi Manikaran, can you put some numbers around how is it better for people under highest tax slabs?

  • collin March 3, 2012, 3:03 PM

    hi manikaran

    Thanks a lot for the review i was visiting the LIC office after I show an advertisement and now i had change my mind.I had taken endowment policy(LIC) in 2004 and komal jeevan plan for my daughter of 3 yrs since 2010. I seek your good advice whether to surrender the policies?

    • Manikaran Singal March 5, 2012, 11:53 AM

      Thanks Collin.

      and also sorry as i cannot advice you on surrendering your policies just like that. I feel that if any of the above 2 policies are proving hindrance in achieving any of your financial goals than you should go ahead with surrender but otherwise if your cash flows are intact and you are able to make other investments for your future requirements then it is purely a personal choice.

  • raj March 3, 2012, 7:01 PM

    hello friends, the article is superb to induce u away from the LIC policy as agents & advisors r paid better commission by private companies. if LIC gives u investment & life assurance both in 1 deal, u require no advisor to help u. just grab it. same policy sighted on ICICI gives 125% returns on maturty while LIC gives 500%. is there any comparison. wake up pl.. It will take atleast 10,000 years for these pvt. companies to come anywhere near LIC.

    • Sunil Verma March 5, 2012, 8:59 AM

      Hi Raj
      u r right

    • Vivek K March 5, 2012, 10:55 AM

      Dear Raj,
      Assuming you want to pay 30k premium for this policy. Try and break down this amount into two: –
      1) Pay 10k towards a term insurance premium.
      2) Pay 20k in a debt mutual fund or tax free FD if you don’t like MFs.

      Compare the returns and life assurance amount and tell us which one is better?

    • Manikaran Singal March 5, 2012, 12:05 PM

      Raj, why are you interpreting my article in wrong sense.
      I agree with you that LIC ROCKS.The Corporation is adequately solvent at this moment and also enjoys a great amount of goodwill and brand recognition across the country. It is the oldest financial institution of the country.
      But still investment and insurance should be seperate. :)

    • Amit March 6, 2012, 12:06 PM

      Hi Raj

      Absolutely agree with you. Have been going thru TFL post for some time now and surprisingly I have rarely come across any critical comments against any of the private insurance players. Maybe the returns from the newer LIC plans are not that attractive when compared with Mutual Fund schemes but we should not forget that the LIC investments come with an added feature of Life Insurance which no MF can match and the argument that Term Insurance + SIP in MF will give better returns does not hold water as is the case now, where SIP investments are giving negative returns over a 3 year period. We should also not forget that none of the private insurance players have been able to match the returns offered by LIC.

      • Manikaran Singal March 9, 2012, 11:01 AM

        Amit, point here is not about going with ICICI/Birla or any other private player for that matter and avoid investing in LIC . Point here is whether one should go with a bundle of product which offers insurance and investment in one version or one should keep insurance and investments seperately. You have rightly pointed out that last 3 years returns in MF SIPs is very miniscule, but last 3 years onetime investment returns in equity mutual funds has almost doubled the investment.(working of SIP and Lumpsum investment is different in different market conditions) Though still i don’t want investors to have 3 years horizon to invest in equity oriented product.
        Can u pls tell me what would be the surrender value of any endownment plan after 1/2/3 years term. it would not be even equivalent to capital invested. Moreover, when we talk about Mutual funds it does not always mean equity mutual funds, there are many other asset classes where one can invest by way of mutual funds.That’s why, look at your requirements, needs , time horizon etc. and take informed decision.

  • AJAY March 3, 2012, 7:20 PM

    I think we are missing tax benefit while calculating the retruns received by any person after investing in jeevan vridhi if he is in 20% or 30% slab difinetly this will increase the retruns.

    • Vivek K March 3, 2012, 11:13 PM

      It may or may not. Read below excerpt from the article carefully: –
      Taxation risk: Pls keep in mind that the proposed Direct tax code provisions of taking sum assured equals to at least 20 times the annual premium , only then that policy will be non-taxable at the time of maturity. As the DTC is yet to be announced and this policy has 10 years term so ambiguity is still there.

      • ZH March 4, 2012, 7:38 PM

        Vivek,
        I guess you missed Ajay’s point. What , I think, he is saying that the premium paid could be part of 1 Lakh tax exemption under section 80C which in turn could make the returns higher. This, obviously, holds true only when some one has something left in the 1 Lakh. If someone has already exhausted the 1 lakh limit, then this policy does not make sense in terms of returns offered. Even a 5 Year Tax Saving FD offers better return even after Tax.
        Now coming to question of whether the maturity amount will be tax free or not under the tax provisions existing after 10 years, no one knows. My guess is that half of LIC’s business will be gone if the govt takes away this provision of maturity amount being tax free. Since Govt is using LIC to bail out banks and PSU’s , I really doubt they will do anything that will have an adverse impact on LIC’s business.

        • Vivek K March 5, 2012, 9:24 AM

          “If someone has already exhausted the 1 lakh limit, then this policy does not make sense in terms of returns offered. Even a 5 Year Tax Saving FD offers better return even after Tax.”

          Exactly my point! Even if someone has not exhausted the 80C limit, other instruments can offer better returns. Why this policy then?

          • Manish Tyagi March 5, 2012, 12:04 PM

            Dear Vivek
            My wife’s earning is 4.9Lacs and she has not done any tax saving till now.

            Now we have got around Rs 80000 which we want to invest for Tax savings.
            Please suggest me, how to go about it, which policies are best suited for this purpose.

            Pls consider that I am not that finance educated, & also the time left for Tax saving is very less.
            Pls suggest the best option.

            Thanks.

            • Manikaran Singal March 5, 2012, 12:24 PM

              Manish

              Though you have not shared any other detail which is required to advise you from financial planning perspective, so purely from Tax saving / Investment purpose, my advise is to buy a pure term plan, open a PPF a/c and put the whole money into that. Better to plan for next years tax saving in the april month only, so you don’t make any decision in haste.
              This Plan is open till 31st may’2012. You may consider( if at all you want to) for next year.

              • SAJU S R March 6, 2012, 10:32 PM

                This plan is open for 120 days Mr.Manikaran Singal.
                Launched on March 1, 2012.

                It will NOT close on 31st May 2012.
                Please calculate.

  • AJAY March 3, 2012, 7:30 PM

    I think retruns will increase if we consider tax benefit and specially if some body in higher tax slab.

    • Manikaran Singal March 5, 2012, 12:15 PM

      Ajay, you are right. If someone invest in it for tax saving u/s 80C and he/she comes in 20%-30% tax bracket then the net returns in his case will be higher, provided maturity amount remains tax free.
      as tax laws keep on changing and one very big change is about to come in few years, so we can’t say it with surety that maturity will remain tax free after 10 years also.

  • kJos March 4, 2012, 12:54 AM

    Sir,
    What formula you have applied to work out the annualised return..

    • kJos March 5, 2012, 7:02 PM

      Sir,
      Surprised why my small query is lost among all this informative posts.. :(

      • Anand March 6, 2012, 12:09 AM

        Hi,

        The author has applied basic Compound interest formula:

        FV = PV* (1+i)^n
        FV = Future value – the final payment
        PV = Present Value – premium paid
        i = interest rate – to be determined
        n = 10 years

        To get i = interest rate:
        i = (FV/PV)^(1.10) minus 1

  • SACHIN SHAH March 4, 2012, 1:48 AM

    If an aged grand mother or grand father wants to give gift to his grandchild for his/her marriage then Jeevan Vridhi would be best option because that amount will goes to the grandchild only at the time of maturity and no body will tuch that amount whether grand parents are available or not

    • Tejas Shah March 4, 2012, 3:21 PM

      you are absolute right sachin

    • Vivek K March 5, 2012, 9:30 AM

      That’d be a decision based on emotions and not calculation. Grandparents can also gift a FD in grandchild’s name and if at the time of maturity grandchild is 18 then it will be all tax free. As of today tax free 10% compounded return on FD is a terrific return.

      • Manikaran Singal March 8, 2012, 8:53 AM

        I agree with vivek saying,”That’d be a decision based on emotions and not calculation”. This is the most popular selling technique i.e emotional selling. when sellers don’t have anything better to offer they use this technique. I never recommend anyone to do such a blunder. If someone is retired then he/she should concentrate on enjoying his golden years, by investing as per his/her requirement of monthly inflow. one should never gift and lockin money in such kind of instruments.If at all one wants to do something for his/her grandchildren than better to do a proper estate planning.

  • Ansu Biyani March 5, 2012, 9:41 AM

    Without knowing total facts, if a person just passes comment, it seems that the person’s EGO is very high than his knowledge.
    ” NEEM HAKIM KHATRE JAAN”
    If you are in 20% or 30% Tax Slab, Jeevan Vruddhi is perfect option ( Please check the IRR properly, & Tax Free Maturity also.

    • Anand March 6, 2012, 9:23 AM

      1) Tax Free maturity is NOT GUARANTEED as DTC may spoil the party
      2) Even if the return is tax free this plans ranks below PPF and Tax Free bonds. If you have exhausted them perhaps this is a good policy to look at but again you need to consider the premium you can shell out, age and other such factors before investing. It is not a PERFECT option but definitely worth looking at to be added to a Debt portfolio

    • Manikaran Singal March 6, 2012, 12:53 PM

      Ansu, you may be right in one sense. But to take the benefit of this so called perfect option, one should be of younger age so the mortality cost is low and also he/she should use it for Tax saving u/s 80C. If someone is using it from investment angle then i differ in opinion.
      Also as 10 years is a very long time to park the money, so i feel that one should also look at some other alternatives before deciding on this policy.
      to add to it, we are not sure what will DTC bring in front of us, so why is so hurry. Better to wait for actual law come into effect. These kind of products keep on coming.

      • SAJU S R March 6, 2012, 10:57 PM

        Even IRDA is not making any action against the Gaint LIC, when the stake is going beyond 10% (as it may not be >10%).

        So there’s no chance of DTC….
        Govt is using LIC to bail out some public sector Banks and PSU’s , I really doubt they will do anything that will have an adverse impact on LIC’s business.

        • Manikaran Singal March 17, 2012, 9:02 PM

          Saju…just for your information…Budget 2012-2013 has tightened the eligibility criteria for life insurance policies to qualify for benefits u/s 80C and 10(10)d. Now only those insurance policies where the premium paid does not exceed 10% of the capital sum assured will qualify for such deductions. This condition applies to policies purchased after 1 april ’12

  • Atul March 5, 2012, 1:04 PM

    Every one talk Bonus from LIC is not Guarateed…..
    Basic structure of LIC is….
    Total Profit -5% Gov. Share
    Balance 95% to Policy Holders as Bonus
    Last year Gov. Share Approx. 1100 Cr. (agenst Gov. Investment of 5 Cr. in 1956)
    Are you still think that LIC will Bonus is ?????????????????

    • Manikaran Singal March 6, 2012, 12:55 PM

      Atul, can u pls share the bonus and loyalty addition track records in different policies of LIC. That will surely be beneficial for our readers.

  • Ajoy Bera March 5, 2012, 1:33 PM

    It is a very nice policy.

  • Suhas March 5, 2012, 3:53 PM

    Manikaran,

    Nice review thanks for the Detailed analysis.
    I see some LIC loyal people (or agents:) are interpreting it in wrong sense…Guys no one says donot go with LIC or go with Private.the point here is just get a term plan for you (Take it from LIC ) and then think of some investment points depending on your goal of tax saving or wealth creation.
    And also the claim ratio which we always talk about donot forget LIC has most of the lower Sum assured policies since you cannot take adaquate insurance if you mix both investment and Insurance…..
    So await for Online Term plan from LIC if you donot trust other players……..
    And if you still think this plan will get some real vriddhi then go for it…..
    “Insurance is the Subject matter of Solicitation”

    • Manikaran Singal March 6, 2012, 12:58 PM

      Yes suhas, you have understood it correctly. The main aim of this review article is to help people take informed decision. No one is against LIC . One can surely buy a term plan from LIC with adequate cover, but for investments keep your goals in mind and weigh the alternatives.
      Thanks

  • Suresh March 5, 2012, 4:01 PM

    Very nice article.As a whole LIC itself is under the control of government and the people money is used at the will of gov.As of today lic is suffering a big loss with investment it has made in ONGC.Who is going to take responsibility for this.Thanks for allowing all the people know about the games that the govt. is playing with public money and we shall better choose other options available.

    • Manikaran Singal March 6, 2012, 1:06 PM

      Thanks suresh. You have rightly pointed out one of the major concern.Where it is advantageous for the investors that LIC investments carries a sovereign back up, there it is also risky as investors will have to compromise on the return part.
      As hemant has quoted Monika Halan in the beginning saying “ever wonder why LIC endownment plan returns around 5%”.
      Safety is Risky

  • Prashant March 5, 2012, 4:05 PM

    Sir
    I am 36 years and need some advice on my financial planning. I have following assets/investments –
    1. Properties – Loan Free
    2. SBI PPF (Continuing since 2002)
    3. ULIP – Started in 2006 – Birla Sunlife (Enhancer and Flexi Lifeline) – Premium 120,319 PA
    4. ULIP – Bajaj Allianz Capital Unit Gain (Equity Growth Fund) – Started in 2007 – Premium 50,000 PA

    I need some investment advice for long term.. i can invest 30K – 40K Per Month.

    Thanks in Advance..
    Prashant

    • Manikaran Singal March 6, 2012, 1:17 PM

      Prashant, please understand Financial Planning is not about Investments only. It involves understanding of your assets, Liabilities, cash flow, goals etc. as in the end you have specificall asked for investment advice on the investment of Rs 30k-40k p.m, i would suggest you to Check out Mutual fund SIPs or Bank RD.
      But better decide after understanding the Risk, returns and taxation. also better to decide onto your goals so you can fix up the time frame of your investments.
      Also if you don’t have adequate insurance coverages, go with those first.

    • Debasish Ray March 9, 2012, 5:06 PM

      Dear Prashant,

      As Manikaran wrote, Financial planning involves lots of different factors. However, since your needs are long-term, and you do not need 80C benefits, you may consider SIPs in diversified equity based mutual funds with proven track record of at least 3 to 5 years. You may also consider investing 10% of your fund in Gold ETFs or Gold fund of funds.

      • Debasish Ray March 10, 2012, 9:54 AM

        I must also mention, you may also consider real estate investment. Just check your investment horizon, surety of inflow of investable fund, liquidity requirements, and effect on tax.

  • Anand March 5, 2012, 4:30 PM

    I think the DTC will really determines the final outgo. In the extended calculations done on the above numbers the true return of a 6.77% for someone in 30% tax bracket is the same as 9.67% CAGR over 10 years taxed at 30% – this is considerably a good return and should make a decent addition to one’s debt folio after exhausting PPF. You can invest in a FD at current rates and sit tight as well.

    In general almost all LIC plans are designed so badly but the offer here appears decent – an exception from LIC.

  • Gagandeep Singh March 5, 2012, 8:42 PM

    Hi Hemant,

    I am searching some info about a child plan from LIC and have gone through your site around 3 days ago and you won’t believe that afterwards I have spent many hours going through many of your articles. It changes my whole approach towards finance planning. I came to know about some blunders I have done for last few years. I want to make some amendments so that I rectify some of my mistakes. I just want to take your opinion on 3 products in my current portfolio which I think require immediate attention. Could you please suggest whether I should close the below three products or should I continue?

    1. ICICI LifeTime (ulip) – 24,000 per annum – Cover 250,000 – Issued 25/07/2005 – Current Value 212704.15
    2. LIC Future Plus (ulip) – 10,000 per annum – Cover 200,000 – Issued 17/01/2006 – Current Value 84192
    3. Jeevan Anand – 33,000 per annum – Cover 10,00,000 – Issued 28/09/2010 – 2 installments paid (Premium payment term – 30 years; Ploci term – 69)

    Other than the above 3 products I have 2 more products through which I have a cover of 15 Lakhs and I am not going to amend those. And I already have PPF account for last 6 years. Now I will be going to buy a term insurance for 1 Crore and start investing in SIP’s from the month of April.

    Thanks a lot for increasing my knowledge on financial planning.

    Regards,
    Gagan

    • Manikaran Singal March 9, 2012, 11:22 AM

      Gagan, continuing or dis conituing the fund totally depends on the cash flow situation of a person. You have mentioned 5 policies out of which you are asking about only 3 and are comfortable with the other 2. After reading so many articles on TFL you must have understood the importance of keeping investment and insurance seperate, that’s why you are going to buy a term plan and want to invest in SIPs. Now when you are going to start investing in SIPs, take a look at your cash flow position. Hope you must have some goals in mind for which you have invested or want to invest . Check out whether the existing products are bothering you or helping you in achieving your goals and then take decision to stop or continue with it.
      No product is good or bad in itself, it just how you will use it and for what purpose, that matters.

  • vikaram March 5, 2012, 10:41 PM

    Dear sir,
    my age is 28, which will be the best LIC policy for me,

    Jeevan Anand, Jeevan Saral or Bima gold

    Kindly suggest good one

    • Manikaran Singal March 6, 2012, 1:23 PM

      Vikaram, please understand that asking such kind of questions may put you in financial mess sometime. You are asking for products and not solutions. Financial Planning wants people to understand solutions and then zero on to any product.
      Better be clear on your requirement and financials and then ask for solutions. and one thing more , pls don’t make your financial life complicated by purchasing number of different products. Understand that there are only 4 asset classes – equity, debt, gold and real estate. match your goals with asset classes which will help you in selecting better product

  • deepak March 5, 2012, 11:21 PM

    Dear Manikaran Sir,
    I’m aged 31 and having a term plan from LIC of 50 lakhs (Amulya jeevan, Term 35 Yrs, Prem-Rs 16300 Yly). I also have a jeevan anand of 5 lakhs SA of 35 years term for which I’m paying Rs. 1133 through SSS. (the advisor says that in jeevan anand i may get Loyalty addition of about Rs 2000 along with bonus of Rs48 per thousand Sum insured if the present rate persists. ) Now he is presenting this jeevan vriddhi as it gives 6.99% guaranteed return at my age. I had invested in two ULIPs and now having only the capital as surrender value ( also no loan facility). So I was planning to surrender these ULIPs and invest the amount in Jeevan Vriddhi. Is there any other option where I can get guarantee in return in this volatile market. I’m in 30% tax slab and my 80c provision of one lakh is already covered. Will the return of this plan be tax free? I don’t want to buy equity as it gives only tension.

    • tinks March 6, 2012, 3:24 PM

      Hi Deepak,
      Its good that you have term plan from LIC.
      I will suggest you to Check with your agent what you will get after paying these many premiums to LIC.
      Will like to suggest not to invest in insurance + investment products.
      If you are investing in insurance policies just for the sake of saving tax-you are on the wrong track Mr.Deepak. You can invest in mutual funds if you are planning for longer term.You can expect return in mutual funds to be around 10%-14%.

    • Manikaran Singal March 9, 2012, 11:40 AM

      Hi deepak
      Your investments should always make you happy at the time of investment and at the time of maturity. So one should keep in mind the ultimate goal for which one is going to invest and then select the investment product accordingly. Returns should not be the goal. Now you also have to understand that where that particulr investment product will furthur invest your money in, as there are only 4 asset classes where the investments will go into.understand the risk, return factors and then decide onto the product. I don’t know if you have done this exercise while investing in ULIPs, as if you have selected the equity allocation, then it’s bound to be volatile and moreover every insurance product has some expenses which will also dilute the ultimte return.
      I am not in favor of selecting product just like that. Surrendering ULIPs and investing in Jeevan vridhhi is a pure personal decision, but i feel that should be helpful to your overall finances. So do some maths for it.
      Yes, today i can say that the maturity amount will be tax free but as i wrote in article , that i don’t know how these investmnts will be taken care by DTC.

  • deepak singh March 6, 2012, 6:08 AM

    it seems what we are asking and what we are commenting are not in coherence. the “THINK TANK” tries to make sense by comparing two different products of different nature . i can not compare “cheeta” with “elephent” on a particular aspect. saving, investments, insurance, parking money, all comes under one roof called financial planning. and one can customized his financial goal by opting different instruments. now my question is it right to compare insurance plans with bank deposits/mf/elss………? i guess when we talk about insurance lets talk about similar products offered by other insurance companies? i guess now we will make a”valid argument” there is no other company stands near LIC when we talk about bonus rates/final addition bonus/ claim ratio/ i give you a mammoth figure ,you know total premium amount collected by pvt insurance was almost half of the amont LIC settled in claims only……….
    now lets talk about MF/ELSS/EQUITY it is some what a gamble and one can not solely plan his daughters marriage on the pretext that on a particular day he will get money to get her daughter married where there is no grantee of sum…. i would love to invest in equity only when i’ll have some surplus money to keep at stake.
    now talk about a riksha wala can you plan for him with a little amount
    that he earn?? is there any product which can catter his need for insurance/investment/banking of money/loan ?? i know there is plan for him in LIC which can offer him a fairly right mix of insurance/investemt/parking of money/loan etc. now which pvt company can offer him product in accordance with his pocket size??
    “JEEVAN VRIDHI” not investment plan i agree, but can you tell me what is investment ? can you tell me same plan offered by any pvt. ins, company? if yes lets compare them and make a valid argument

    • Manikaran Singal March 9, 2012, 1:43 PM

      Sir, you are very true. M exactly saying the same thing. we cannot compare insurance plans with bank deposits/MF/ELSS etc. Insurance plans are meant to provide insurance cover, so one shold use these instruments for this purpose only.
      We as Financial Planners have never been in favor of Mixing insurance with investment. You seem to be more experienced person to me ,may i please request you to share some data on the past experienec of LIC products on bonus rates/or loyalty addition etc. this will help our readers to make some decision. Regarding claim ratio i some how agree with you that’s why i support the decision to buy term plan through LIC. But claim ratio and premium collection does not have any impact on the scheme performance. Please correct me if i am wrong.
      Now let’s come to your saying that MF/ELSS/Equity are somewhat gamble products…..Deepak singh ji, if this is the case than why LIC came up with products like Future Plus/market plus which are ULIP in nature and invest people’s money in Equity. I am not saying that what LIC did was not right, infact i appreciate the corporation to come up with one more asset class i.e equity in its product portfolio.It has actually helped those who treats insurance as investment to diversify into one more asset class.
      I also agree with you that one cannot solely invest in that instrument where there’s no guarantee of returns, but that’s why we say “ASSET-Allocation” is the key. One needs to keep on reviewing the products and investments when there’s some goal attached to it. But the review should be after understanding the basic nature of asset class.
      I once again reiterate the basic crux of the review – Take informed decision.
      Look i agreed with you on many points, so there’s no need of argument. :)

    • Debasish Ray March 9, 2012, 11:32 PM

      Dear Mr.Singh,

      When you are buying an insurance plan which also serves as an investment, like an endowment or ULIP. you have two things in mind: 1. Life cover, 2. Returns. Product is not the goal…protection and returns are.
      Now, why do one necessarily need to compare an insurance product with another insurance product only? I would prefer to pitch a Term Plan+PPF against a traditional endowment plan, and a Term Plan+SIP against an ULIP and compare their returns, as my goal is to find a better solution for my financial & protection needs. So, what is wrong in comparing two different types of product?

  • Hrishikesh March 6, 2012, 11:09 AM

    thank you very much sir..

  • Naresh March 6, 2012, 12:17 PM

    I am going for this policy as I trust in LIC. LIC is the only company which has very high settlement rate.

    • Vivek K March 6, 2012, 7:52 PM

      Is this the only criteria you have for taking any policy?

      Agree LIC has high settlement rate. This is because they don’t get high value claims, maximum would be 5-10 lacs. Most of their products are investment based products where LIC would be earning 15% and passing on 6% to the investors. Any company can have high settlement rate with this business model.

    • Manikaran Singal March 6, 2012, 8:04 PM

      Agree with you that LIC has very high settlement rate. Go with LIC term insurance.

  • bhimavaram vmr kumar March 6, 2012, 1:32 PM

    sir, i have one child ageing 0 age , please suggest good child insurance plan which includes waiver of premium and income benefit rider and also get good returns after completion of the term of the policy.

    • Vivek K March 6, 2012, 7:55 PM

      Go for mutual funds sir, child insurance plans are not going to give you any benefit.
      If you have risk appetite go for equity mutual funds [recommended for long term] otherwise go for debt mutual funds. This will not only give you returns that can beat inflation but also generate corpus for you child’s higher education.

    • Manikaran Singal March 6, 2012, 8:14 PM

      Almost all child plan comes with the 2 riders that you have mentioned above, but you need to understand that more the riders, more will be the cost and thus less returns.
      Child plan always works best in case of demise of parent and thus not good for investments. and if at all you are looking for this benefit only then why don’t you buy a term plan with adequate sum assured and invest in PPF or MF for your child’s future.
      I am sure that would prove to be a better combination

      • Mark D' Almeida March 8, 2012, 12:00 PM

        Having invested in various insurance policies and over 30 years, and sad to realize that there is nothing called “life” insurance but “death”. Further, concept of the insurance is a very pessimistic. Have you all asked or every questioned that you are 1 in a million to die?

        Also the rig-ma-role of running around & documentation worth that you put the living people run around for worth?

        Don’t you think the sprawling buildings of insurance companies insurance agents haunting, stressing you up. So, forget all that in the name of Insurance and all it’s tax benefits…

        A bird in hand is better 2 in the bush….

  • bhimavaram vmr kumar March 6, 2012, 1:34 PM

    suggest good child insurance plan, ppt is 18 years

    • Manikaran Singal March 9, 2012, 1:49 PM

      its better if you design your own child plan by buying seperate products of insurance and investment.

  • Manoj March 6, 2012, 3:46 PM

    It seems that Mr.Manikaran is showing acute favoritism towards private insurance companies. The deliberations are very much prejudiced and with an intention to tarish LIC, the reliable face of insurance business in india. I am one suffered a lot on account of investing the ICICI and Birla insurance schemes suggested by you and my experience is that I neither got any premium addition nor majority of the amount invested by me and I was a loser in every respect. But my experience with LIC is different. I got the sum assured plus a reasonable additions when i got one LIC policy matured last month. I am satisfied with the service of LIC. I request Mr.Manikaran to consider the case of the hard earned money of common people of india like me is losing by investing in private insurance schemes, while write negative comments about LIC, the only trusted player of insurance in indian market.

    • Manikaran Singal March 6, 2012, 7:42 PM

      Manoj, you have got me wrong.

      Nowhere in the article i have written that one should go in for ICICI or Birla insurance policies, neither i have written that one should not go with LIC. Also i strongly object on your saying that icici and birla insurance has been suggested by me or hemant through TFL. Readers of this blog are definitely with me saying that this blog never promoted any particular product and we are also against mixing insurance with investment. So whatever gain or loss you booked was totally your decision. I totally respect your trust towards LIC, and i understand that this is the most trusted brand in the country. But that doesn’t mean that one should purchase each of its product with closed eye. And yes, i am considerate about the hard earned money of common people that’s why i want people to take informed decision.

    • Debasish Ray March 9, 2012, 11:49 PM

      Dear Manoj,

      I hope you are not comparing apple with oranges!! I think you are comparing ULIPs with traditional plans!!

      1. Those Pvt. insurance products you bought were ULIPs or traditional plans? I guess ULIPs. Which fund did you choose? I guess equity fund. Now, during the same period when you were invested, how much returns LIC’s ULIP plans with equity fund investment delivered? Is it more, less, or equal to the returns generated by Pvt. players? You should compare that.

      2. If you invest in traditional plans of Pvt. insurers, on maturity you will get similar benefits like sum assured, bonus, terminal bonus etc. like LIC. Returns will also be more or less similar, i.e. pathetic.

      3. I also guess that you exited Pvt. insurer’s ULIP plans before maturity. So if you consider premature surrender of policy, then surrender clause for traditional plans are “30% of all premiums paid excluding the 1st year’s premium” – for both Pvt. insurers and LIC…..excited?? :-)

      Please note that I am not against LIC or in favor of Pvt. insurer. I am against all insurance policies sold as investment plans. Pure Term Plans are the only insurance plan one should buy…from any insurer of one’s choice.

  • Ranjan March 6, 2012, 4:14 PM

    Hi, Hemant
    I was very eager to know about this policy, when i saw this add.
    But now its very clear to me..I m agree with you that why people want to mix investment and insurence..
    Thanx for making me Smart investor.

  • S.K. AGARWAL March 6, 2012, 5:02 PM

    I read your article. I personally thinking your are absolutely biased. As you wrote in your article that this policy is giving 6.85% guaranteed and 8.12% non guaranteed. Lic will invest your money in government securities. In government securities the interest rate is on an average is 9.00%. There are some charges also like agents commission, d.o.’s salary, administration charges. First and foremost is that a person is get insurance. Because it is a insurance company. Please tell me which company will gives you this kind of returns. So lic is giving you good returns, according to my self. As you discussed about the f.d. and n.s.c. you forgot that this scheme are taxable. The tax payer will get only benefit of 80c not maturity benefit. In insurance the maturity is non taxable u/s10 10(d).
    Please reply
    please do not hide this discussion from this website.

    THANKS
    REGARDS
    S.K. AGARWAL

    • Vivek K March 6, 2012, 7:58 PM

      How about putting the same money in debt mutual fund? Will it not give you tax free returns? And I am sure it will be more than 9%.

    • Manikaran Singal March 6, 2012, 8:03 PM

      Mr Aggarwal , I have only calculated the return percentage as per the illustration on LIC website. Also to make clear for the readers , the illustration is of person with 30 years, which means that returns will be less for the investor with higher age.
      If you are happy with such returns than it is good for you. Its all about acceptability of product after understanding the pros and cons. as far as taxation is concerned, though i am sure that one will get benefit u/s 80c but not of 10 10(d) as it all depends what will tax laws say at the time of maturity.

    • Debasish Ray March 10, 2012, 12:12 AM

      Dear Mr.Agarwal,

      Whether it is LIC or any Pvt. insurer, investment mandate for traditional plans are similar…roughly 75%-100% in G Sec., rest in high-rated corporate bonds. Now, all insurers have cost like admin, overheads like rents and utility bills, other office expenses, salaries and benefits for staffs. To make things worse, agent commission for insurance products are obscenely higher compared to any other investment option. And after that these companies need to make profits also (including LIC). So, how much of total return they can really share with customers? Just check if these insurance plans including LIC’s protect against inflation, if not, then these plans are actually shrinking the purchasing power of your money over time.

      You can also have a look at the reply I gave to ‘Mr.dd’ above for different investment options other than insurance. However, since it seems you prefer traditional insurance plans, consider buying a combination of Term Plan+PPF instead of endowment plans. That will suffice all your purpose of investing in LIC including life cover and tax benefits. and also generate better returns.

  • pranjal goswami March 6, 2012, 7:06 PM

    lic is giving more return than any other insurance coin india.. if you want both insurance cover and return than jeevan vriddhi is a wise choice..
    Forget about pvt insurance co there return is -ve from market ..even in worst condition lic return is more than 5% from ulip policy..
    LIC protect the face of Gov by buying 41 core of share ..total no of shares were 42.27 crore..
    Now think what is LIC of India..

    • Anand March 7, 2012, 10:48 PM

      There is no need to be too much praise of LIC. They do business and we buy products.

      The insurance part in Vriddhi is a joke. Jeevan Vriddhi is a decent policy but that is only if you have exhasuted your PPF and HAVE A TERM Insurance.

      And LIC buying 41 crore shares ONGC shows 2 things:
      1) It has a deep pocket that is put into use for unproductive things like bailing out a Government sale
      2) It has no say on it own which means it can not always necessarily deliver good things to its customers even if it wanted to!

  • AJAY March 6, 2012, 8:57 PM

    Hello Manikaran,you know why people go for LIC,FD and similar type of products because they femiliar with them and using all of them from a long time and getting retruns wether it is low but they having peace of mind now few years back when they tried ULIP produts and MF without knowing the product fully lot of people had high losses so this all means one should only go for financial product if you know fully about it.

    • Anand March 7, 2012, 10:54 PM

      That is a lame excuse. To begin with do you know how to calculate the IRR or simply put – the rate of return of a LIC policy?

      Inflation eats all LIC and FD returns and there is ABSOLUTELY NO WAY TO GET AHEAD without exposure to Equity. So you may ask how people in 1970s, 1980s and 1990s managed things without much of Equity. Well – the inflation was same or even marginally lower than today and Government sponsored PPF and NSC provided even 12% returns for long time – which was enough for them. It is not the case today.

      You cant shun from MF just because you do not understand it. You HAVE to take the pains to get educated and then make a judgement.

      I am not being harsh but until all of us come out of the mentality that fixed income products alone are sufficient it will be difficult to improve our fnancial lives.

    • Manikaran Singal March 9, 2012, 2:03 PM

      Totally agree with you. to add to it, more than financial product one should understand himself first. Decide onto goals, give them inflation adjusted monetary figures and select asset classes to help you reach those. Then search for the product and invest after understanding the pros and cons.Investing in product and then searching for the reason or excuses for this investment is a BAD IDEA.
      Ajay, it will take time but we take it as challenge and keep on doing our bit.

  • Pareekshith B March 6, 2012, 9:14 PM

    Hi Manikarnan
    I gone through all comments here and your suggestion also.
    Is any of investment product will give in writing that assure 10 – 14% returns. After 10 years if market crashes suddenly like Feb 2008, what happened to our hard earned investment. if not growth is our investment is intact? Ans- Not predictable Secondly What things are there in ICICI, BIRLA or BAJAJ policies which is not there in LIC. Bonus ratio, Life fund, settlement ratio, Co., Profit, Govt guarantee. Let me know the reasons for all.

    Thanx

    • Manikaran Singal March 9, 2012, 2:09 PM

      No there’s no investment product whhich can assure 10-14% return. One can calculate only on assumption based on past experience. Asset allocation is very importnat so one can comfortably face the market crashes like Feb 2008. your second question reminds me of Amitabh Bachhan in Deewar, to which LIC can comfortably say “mere pas government Guarantee hai”.

  • vinay dave March 6, 2012, 10:17 PM

    hi
    please, when you go for insurance cover and don’t look for returns and when going for returns don’t club it with insurance .keep investment and insurance separate.

  • Atish March 7, 2012, 12:50 AM

    Hi Hemant,

    Why I feel that you writing look like Anti LIC.

    I have not seen you writing about Private Insurance company.

    One side you suggesting ELSS, 5 year FD.

    In case of ELSS… My personal experiance says that i have invested Rs. 75K and save my 20% Tax… But even after 4th Year not more than 50% are recovered from investment.

    In case of FD… There is also Interest Risk and top of it, FD interest is Taxable.

    I think you should not be un-biased while explaining any product… Let reader decided what is best for them.

    Further… we would like your comment on all the products come into Market and not only LIC products.

    • Hemant Beniwal March 7, 2012, 9:23 AM

      Hi Atish,
      Let me start with “Products (ULIPs/Endowments) from Private Insurance companies are even worse than LIC” – this is a generalized statement but I hope this will satisfy you that I am not supporting any private company.
      Most of the ideas for writing articles on TFL are generated either through queries from readers or my interaction with people. As LIC has the biggest market share in all financial products – most of the time people ask questions on same. But that doesn’t mean we have not written reviews on Private Insurance Company products – check
      Bharti Axa Aspire Life
      http://www.tflguide.com/2009/08/insurance-schemes-or-insurance-scams.html
      Metlife Monthly Income Plan
      http://www.tflguide.com/2009/11/ad-mad-mad-advertisementmetlife-monthly-income.html
      Just to add – my less than 10% articles are on particular products so out of 200 articles that I have added on TFL – less than 20 will be speaking about any scheme. And hardly 2-3 reviews are positive.
      But mixing insurance with investment is a wrong thing be it ULIPs or Endowment Plans. And we have made people aware about it.
      http://www.tflguide.com/2010/04/what-is-insurance-investment-or-expense.html
      We have also tried to explain that Indians don’t understand insurance
      http://www.tflguide.com/2010/12/psychology-indian-life-insurance.html
      We have also shared that how these products are mis-sold but as an end user if you don’t want to understand – that’s clearly your choice.
      http://www.tflguide.com/2010/08/mis-selling-tricks.html
      This doesn’t mean I have supported products of Mutual Funds –
      Mixing Insurance with Mutual Funds – wrong idea
      http://www.tflguide.com/2011/08/reliance-sip-insure.html
      or MFs pushing gold products
      http://www.tflguide.com/2011/08/sbi-gold-fund-review.html
      I don’t think there is any need to clarify further but people, who are reading articles on TFL, must read the Disclaimer “All the content on this blog (tflguide) is solely for the readers’ general information. This blog contains our personal commentary on issues that interest us. Nothing on this blog is intended to be a personal advice and reader is himself/herself responsible for their decisions. Before acting on any of the information provided, consult your financial advisor.”
      We have only 2 options in life – CHANGE or ACCEPT. So, try to Change what you can’t Accept & Accept what you can’t Change. Hope you got my answer.

  • Bhupendra March 7, 2012, 9:29 PM

    Dear respected sir

    There is One more plan of Bajaj Alianz is similar to jeevan vriddhi
    (Single Premium, term 10 year & Guaranteed Maturity)

    Please tell which one is better.

    Thanks

    • Manikaran Singal March 9, 2012, 2:13 PM

      betterment of any product is there where it suits your requirement. personally, i wuld not advise mixing insurance with investment.

  • ANUP March 8, 2012, 4:32 PM

    Don’t ever invest on MF’s or in share market. Just plan and think of investing in real estate, invest in land which will always give you better returns.

  • umesh March 8, 2012, 5:43 PM

    I had an LIC endowment policy which is maturing this month. Against a policy of 1 lac i was told that i am getting around 1,60,000/- after 15 years. I want to invest money that I received from LIC + willing to pay a monthly premium to the extent of 10,000 per month in some descent policy which gives me value for my money and live cover. Pls suggest what is the best option for me.

    • Manikaran Singal March 9, 2012, 2:19 PM

      Umesh, your investment cum insurance product has generated annual return of 3.18% p.a. Are you still looking for same kind of investment, as in your question you are specifically asking for a policy. DID you get the value of money in your last investment?

  • Raja March 8, 2012, 11:18 PM

    As any good financial advisor would do, I always recommend equity based products for long term portfolio. ( without which you can’t conquer the long term enemy – that is inflation).

    But investors come from different color and different flavor. Not every one can sleep with equity based portfolio peacefully.

    Among all the endowment products, that are available to this community, this is not a bad product at all. Jeevan Anands and Jeevan saral are best selling plans and they make more people in this country poorer every day.

    We must appreciate LIC for bringing this kind of product. We should not criticize LIC even when they do things correctly ( for a change),

    Taking 80C benefit and 10(10D) benefit into consideration, a 35 year old is looking at 11% yield. Show me a product comparable to that today.

    I would say if you are time pressed, and have to buy some thing before this March end, go for it.

    • Manikaran Singal March 9, 2012, 2:26 PM

      Thanks Raja for your views. But what would you advise to a person who’s already exhausted 80C investment limit , and in this kind of uncertain Taxation scenario where we are not clear what would the proposed DTC do with such kind of investment. And moreover if a person is older than 35 years

      • Raja March 9, 2012, 7:15 PM

        No, I wont.

        You are picking a situation for whom this product won’t work. why ?

        A 35 year old businessman and with a varying income level and have some tax issue for this year but not sure if he will be in tax bracket next year, who is short of 5L insurance but don’t want to take a separate insurance plan may go for this.

        If you are writing a review you can conclude in the end, saying to whom you will recommend and to whom you will not.

        PPF investment is no brainier. 80C or no 80C, many of us can take advantage of investing in that. That does not mean we have to shoot down all the plans comparing them against PPF.

        • Debasish Ray March 10, 2012, 3:11 PM

          Dear Mr.Raja,
          Agreed. This may be a better plan among the available endowment products. I also agree that this plan may be suitable for a young 30-35 year old person, shoert of 5 lac insurance cover, insurance cover requirement is also for roughly 10 years, presently at highest tax slab, but may not be taxable next year! possible. But that is rare and a very very nische segment. In reality this product, since coming from LIC, will be bought by, or rather sold to anybody who presently has investable fund, without any consideration to product suitability or net yield.
          The tragedy is you will find most people with 10 insurance policies, but still terribly under-insured, as endowment plans provide low life cover. You will find most people who do not even know how much returns these policies are giving them, or what is the risk if the returns are considerably less than inflation rates. I strongly believe major regulatory changes are required for insurance business in India.

    • Debasish Ray March 9, 2012, 8:19 PM

      Dear Mr. Raja,

      Please let me know which product is giving 11% yield…

  • Ajay Kumar March 9, 2012, 12:52 PM

    Dear Sir,

    First of all thanks for your review on the life insurance product.

    I just wanted to ask you few questions

    1) Whether to buy any traditional policy on Any Insurance Company or any one specific company.

    2) If insurance does not provide good returns which product to be bought. Also I read on some govt website that FD’s income is taxable, if someone is already in the 20% slab what amount does he get on a maturity of 9% (bank FD) after 5 or 7 years from now.

    3) If alternative is ULIP, how much monitory risk should we take and on which product

    4) How do you rate insurance companies in terms of stability and return.

    5) It is in the news that most of the pvt ins comp are losing business and does not declare their T&C correctly like premium term, surrender factor etc

    6) I am not technical too insurance but I have seen suggestion on different websites where people try act smart while giving instruction to buy or leave a insurance policy but your suggestion will be recommended only when you answer the above questions truly.

    Looking forward for your expert advise just not for my knowledge but all the visitors of the web.

    Regards,
    Ajay

  • Chetan Singhal March 10, 2012, 9:44 AM

    Hi Hemant,

    Please throw some light on the current MF schemes available & the investment-return detailing on the same as depicted by you for the LIC policy. It makes the policy easier to understand & also gives a clear ppicture of the annual yield.
    Also, talk about the duration for which the MF should be taken.

    Regards

  • amit seth March 10, 2012, 10:10 AM

    Hi, Mr. Manikaran,
    I have gone through your calculations, one thing is missing and that is High Sum Assured Rebate. With your write up, I am able to understand your frustrations regarding LIC. You said that there are better options with co. like ICICI,BAJAJ,Birla Sun Life, etc. Well Mr Manikaran you should understand first the thing called “TRUST”. You must state about the financial health of your favourit companies. If you don’t know please go through the site of IRDA where you would be able to know that all the private insurance companies are aggregating 20,000 CRORE as LOSS. This is a National Loss. Now I must tell you one more thing and that is that LIC is acting as TRUSTEE of people’s Money where as your Favorited co.s are here to do business and business may attract Losses. I am not able to understand why YOU and people like you are trying to create environment against LIC .You all should know LIC first than comment.

    • Manikaran Singal March 10, 2012, 6:52 PM

      Mr Seth, though what i would have replied to your comment has already been done by debashish, and he replied very correctly and to the point. Nowhere in the article i have written that ICICI, Bajaj etc.are better options. I just want readers to look at there products also IF AT ALL they found LIC Jeeva vridhh interesting. Along with that please read the last line of the article where i have clearly mentioned my advice as not to mix investment with insurance. Time and again i am repeating the same thing that i am not against LIC. this review is just to help people to take informed decision.
      Just to add one more point that LIC is also doing business and making profits out of people’s money only.

  • Debasish Ray March 10, 2012, 2:37 PM

    Dear Mr.Seth,

    Though I should allow Mr.Manikaran to reply to your post first, but I couldn’t resist myself from writing a reply. I hope you and I read the same review and comments posted by Mr. Manikaran. I wonder where did you find that Mr.Manikaran said:- “there are better options with co. like ICICI,BAJAJ,Birla Sun Life, etc.”?? Kindly inform as I couldn’t find any such comment or notion from any line Mr.Manikaran wrote.
    In fact what I found that Mr.Manikaran is saying one should not mix insurance and investment, for insurance cover one should go for Term Plan from one’s choice of company, including LIC, and for investment, one should look into other investment options beyond insurance products. I share the same view. There are other investment options in the market which gives similar tax benefits, similarly trustworthy, and provide better returns than any insurance company including LIC! And I am sure all insurance companies, including LIC, are there in the market to do business only!!

    • amit seth March 12, 2012, 9:18 AM

      Dear Mr.Ray
      I must appreciate your views. I would like to inform you regarding business activity of LIC. with only 15% of its revenue invested in the market LIC has earned more than the total premium collected by private insurance cos, and the same amounted is invested with GOVT. to fulfill social needs of the nation. LIC is the state owned organisation and hence has responsibility to help building up the nation. Lic works with the motto ” People’s money for People’s welfare”.As I had stated in my note to Mr. Mani karan that LIC is TRUSTEE of people’s money.I there fore request you all that you should keep this very important aspect of LIC in memory before commenting. I would be great full to you if you can let me educate about other insurance co.s having such contribution towards the society.

      • Vivek K March 12, 2012, 10:45 AM

        I am really keen to know what has LIC done to help building the nation? You seem to know a lot about LIC, can you please provide some facts and figures?

      • Debasish Ray March 12, 2012, 12:24 PM

        Dear Mr.Seth,
        I am not seeing this discussion as a LIC vs Pvt. insurance companies. LIC is no doubt a giant with roughly 70% market share. The discussion was whether to invest through a insurance plan or to go for Term plan+other investment options.
        Further, as you have said LIC’s money “is invested with GOVT. to fulfill social needs of the nation”, all traditional plans of all insurance companies are primarily invested with Govt. securities as per the IRDA guidelines. Though, I am not looking at the insurance products from nation building perspective, but from return perspective. For nation building I can pay tax properly, even choose not to invest in 80C products and pay more tax, donate to some good NGOs, or donate my time & labour in nation building activities. Why LIC? And just to add, legally all insurance cos. are trustees of people’s money.
        Further, I appreciate all the qualities of LIC you have mentioned above, but all these qualities apply to PPF also. And for nation building, it is not the case that only Govt. companies help in nation building, Pvt. insurance cos. are new and small, but look at the big cos. in Pvt. sector. Don’t you think companies like TATA or Infosys also contribute in nation building?
        However, all these factors are irrelevent from a purely financial planning perspective.

      • Raja March 21, 2012, 1:26 AM

        Dear Seth,

        Are you sure about how LIC is managing the money ?

        Are they really as good as you give them credit for?
        I feel LIC fund managers are only as good as any other private insurance fund managers. No special skills.

        When ever govt is stuck with some bad investments or bad execution ( like recent ONGC stock sale), govt ask LIC to pick up the investments. Who pays for poor investment decisions ? The traditional plan policy holders of LIC.

  • vinay jaswal March 10, 2012, 8:35 PM

    Sir
    I am forward the details of my portfolio and requested to you please give suitable advice regarding investment purpose. Sir my goal approx 10 lakh required for daughter education after 10yrs and 20 lakh required for marriage after 15 yrs. please gives advice about my policy/funds which are good for investment and efficient to achive above mentioned goal. The details of my policy/funds are as under and sir also requested which funds or policy exit in my portfolio.
    1 ICICI smartkid –new unit linked plan – 12000 yearly
    2 Ing vysya new future perfect plan – 15000 yearly
    3 Reliance growth fund –retail plan- growth option – 1000 PM
    4 Reliance regular saving fund – 1000pm
    5 SBI Flexi smart insurance plan – 36000 yearly
    Sir I am awaiting for your response.
    thanking you
    Yours sincerely
    Vinay Jaswal

  • Debasish Ray March 11, 2012, 12:05 AM

    Dear Manikaran and Hemant,
    I came across this site while searching for some details about Jeevan Vriddhi on request from one of my customers. I must say you guys are doing a commendable job…hats off to you guys. I couldn’t resist myself from putting some comments on couple of reviews including this one.

    Financial Planning is not a developed concept in India, and financial literacy is very low. If you search for data you will find Term Plans are among the least sold products for any insurance company, whereas Term Plans are the only plans that should sell. It seems Govt. should consider adding a subject on Financial concepts, markets, and investments at college level :-).

    Its high time for stricter regulations in insurance sector, with special focus in the traditional plans segment, sales brochures/illustrations, and sales processes including bancassurance. Agent commission is one area that needs restructuring. I mean, if the agent commission is so high for low-yield debt oriented traditional plans, what returns a customer can really expect??

    • Hemant Beniwal March 13, 2012, 6:36 AM

      Thanks Debashish,
      I appreciate your comments and I am sure they will be helpful for most of the readers.
      And I am also sure this is first time people are reading such things about their finance.
      Regarding bancassurance – there are “2011 bancassurance draft guidelines” by IRDA
      Page 42 of the report sees the committee agreeing that banks are mis-selling insurance. The committee worries about the unequal relationship between banks and insurance companies and it says:
      “The insurer ends up paying a fat upfront fee running into tens of crores, at least one-fourth of the prospective business, training costs, infrastructure costs to the bank brochures, expenses towards the transactions, incentives, travel, entertainment for the bank staff are some of the heads under which the insurer is fleeced. The accounts at both ends are opaque and the payouts exceed the prescribed commission by a large measure.” :(
      So people have to understand something is wrong somewhere and they should start learning personal finance basics asap.

    • Manikaran Singal March 13, 2012, 2:00 PM

      Thanks Debashish!!

      I loved some of your comments that you have posted on some of the queries and I must say that your thought process is amazing.

      I agree with you that Financial planning is not a developed concept in india, and the reason is low financial literacy.
      But i also think that onus lies on the investor himself. Our Financial wellness is in our hands. This is high time regulators should join hands and make people aware with different investment awareness programmes to make investor more confident and literate with financial matters.

      But to start with let’s keep on doing our job ;)

  • Ravi March 11, 2012, 3:59 PM

    Very interesting to go thro the discussions. I accidentally came to this forum , but found very useful and educative.

    Assuming someone wants to take insurance cover and also wants the money back after sometimes ( since he may not be that one in million), these kind up mixed plans will be attractive.
    For ordinary people who are not familiar with equity markets, the equity is some thing which is dangerous as they read out the from the newpapers.

    It is not only the govt which playes with the investors hard earned money, but the private players also.

    When NAV goes up and down, it is the investors money and not the salary of the employess of that company ( LIC or others).

    I would suggest that individuals spend some time in understanding the financial products, though it might be little bit difficult.

    There is no free lunch and in a real market, one cannot make huge difference unless he does something totally differently.

    Keep it up

    • Manikaran Singal March 14, 2012, 7:46 PM

      Very true ravi. Financial literacy is very important. One should understand his requirement , then one should thorughly understand the product features and checks the suitability to his/her profile, and checks whether that product will help him achieveing his goals or not.

      Righly said…there’s no free lunch

  • Abhishek Kumar March 11, 2012, 4:01 PM

    Dear Manikaranji,
    First of all, let me congratulate you for the wealth of information you have put in public domain, and keeping this excellent forum alive and hugely informative by investing so much of time and effort.
    I fully agree with the basic premise, NEVER mix the insurance and investment, these are two different aspects of financial planning and must be approached differently. I have some very simple questions which I am sure many of the people may have :
    1. INSURANCE : What is the best Term Insurance Product, keeping in view the very cheap online products to very expensive but “secured/reliable” LIC products? Does it make sense to have a combination of the two i.e. One from LIC, say for 50 lakhs and another from private, say, SBI Life Smart Shield with riders where cover keeps on increasing?Does SBI Life enjoy any additional advantage in terms of security on account of SBI being Public Sector entity and majority share holder in SBI Life.
    2. PENSION : Everyone wants security in twilight years of post retirement? What are the best pension products including guaranteed Pension for a middle class family with secured income (govt. job) of say, Rs.50,000/-pm. I heard that earlier the LIC had offered Jeevan Suraksha which was a very good product but has been discontinued. Is New Pension Scheme a good option for those not in government jobs? How should a person with irregular income have a regular pension?
    3. INVESTMENT : How should a person without any financial knowledge, plan his investment? How to make a relatively safe start? You may please also suggest good websites for acquiring basic financial literacy.
    For the records, I am an 35 years old Group-A officer under central government with monthly income of Rs.50,000/-and covered under GPF-cum-Pension Scheme, looking for a term plan. My wife is a Scientist but in Temporary position (security of income not guaranteed but likely to continue) and earns raughly Rs.40,000/-, has a PPF and needs a Term and also pension plan of her own without taking my future pension into consideration.
    I understand that I am asking for lot of guidance but believe this would be beneficial for many readers. With best regards, Abhishek

    • Manikaran Singal March 13, 2012, 1:37 PM

      Thanks Abhishek!!
      The main Idea of keeping Insurance and investment seperate is to get adequate amount of Sum assured with least expenses and also with this one can keep the investments more cost effective and flexible, which makes them more manageable. Now let’s come to your questions:
      1.)There’s no best or worst term insurance. Every Insurance company offers term insurance plan. One may select as per his comfort level. Many people are comfortable with LIC though its premium is high as compared to other ones and many likes to go with Online term plans which can be purchased conveniently and with less premium outgo. There is no difference in the product. But one has to disclose all the facts and figures truly as asked in the proposal form to avoid any claim issue later on. Buying increasing sum assured policy depneds on that particular case. I feel that with time people keeps on saving and investing and one knows that his income level is going to improve overtime, which means that the insurance need will be on reducing side, so manytimes increasing sum assured policy does not suit to the client.

      2.)Pension planning or retirement planning has 2 stages…one is accumulation stage – where you select various investment instruments as per your comfort level , risk appetite , target corpus and keep on saving money in those till your retirement , and then the second stage i.e distribution where again you make use of different ooptions like immidiate annuity, SCSS, POMIS. MF MIP and other combination. Pension plan also works in the same format. I don’t think buying a aprticulr company’s pension plan will suffice your purpose as it does not provide with the flexibility. You may use different instruments like PPF, Mutual funds, NPS etc. for accumulation purpose.

      3)better be friends with a good Financial Planner. Keep on reading different blogs. I cannot write name of any other blog without hemant’s permission. and will leave this decision with him only.

      Hope i was helpful :) with your queries

  • mohit sethi March 11, 2012, 8:03 PM

    Dear Sir
    MY age is 28 years.
    I want to have a life insurance cover
    I want to pay Rs 10000 annually for 20 years
    Which is best plan for me with maximum benefits.

    • Manikaran Singal March 13, 2012, 1:41 PM

      Mohit, better to ask for solution than product. I would advise to go with a term plan with atleast 15 times your annual salary( as per thumb rule) and start investing the balance of Rs 10k as a SIP in equity mutual fund or if you are not comfortable with equity then open a PPF a/c.

  • birendra xalxo March 12, 2012, 8:26 AM

    lic is creating liability for itself by launching such guaranteed product ( jeevan vridhi) . this plan has two parts : risk cover and investment . you get Guaranteed Return of 10.11%(Compunded yearly) at age 50yrs. Suppose age of LA is 50 yrs and if he takes Jeevan Vriddhi policy for single premium of Rs.1,00,000/- Then he has to pay premium with Service tax Rs.1,01,545/- which includes the premium of term assurance and the saving portion. The term assurance single premium for 10 years as per LIC’s Anmol Jeevan Plan for SA 5,00,000 is Rs.39,355/- the remaining saving portion is Rs.62,190/- (1,01,545 – 39,355 = 62,190) and Guaranteed Maturity Sum Assured of the policy in this case is Rs.1,62,972/- i.e.compounded yearly return of 10.11% without taking tax rebate benefit or Loyalty Addition on maturity. So it is a wonderful plan . No plan exist better than this in this market today .

  • Debasish Ray March 12, 2012, 3:33 PM

    Dear Mr.Xalxo,
    To start with, we have to first consider if that 50 year old investor at present has any fresh requirement for a 5 lac insurance cover for 10 years. I mean, generally at this age his kids have grown up, his home loan is nearing to completion, he has already saved significant amount for retirement & contengencies, and he already has sufficient life cover which he boought at the age 30 or 40 when he needed it the most. Hope he is not being pushed for an unnecessary insurance cover and related cost.
    If he has no fresh requirement for an insurance cover, then PPF @ 8.60% would give him Rs.237789 on Rs.101545. 10 year FD @9.50% (IDBI) would give him Rs.259666 with total taxable interest Rs.158121, @30% tax slab he will be at profit.

    Now, if the 50 year old guy really need 5 lac insurance for 10 years:
    Before considering that first correct two things, first in your above calculation return would be 9.75%, not 10.11%, kindly check. And mortality/Term insurance cost should be calculated on actual risk amount, i.e. 5 lac less premium already paid=4 lac. Mortality is charged on that amount only, as rest of the money is with the company and that is not risk. LIC premium calculator site is not opening, so I could not calculate on 4 lac.

    However, since in case of Term+PPF, we have to keep the death benefit same as Jeevan Vriddhi, lets keep the Term cover at Rs.425000. LIC premium calculator site is not opening, so i took data from HDFC Life, its a decent company with consitent death claim settlement ratio above 95%. single pay term premium for 50 year old for 10 years is Rs.26493+taxes, roughly Rs.26758. Investable amount at hand (101545-26758)=Rs.74787.
    If he invests Rs.74787 in PPF @8.60%, his return would be Rs.175130, higher than LIC’s Rs.162972. Even If he puts in 10 year FD @9.50%, he gets Rs.191241 with taxable interest of Rs.116454. If his tax tax slab is 20% or less, he will be at profit. In case of death, his family will get 425000+74787+interest, similar to LIC.

    What I am trying to say, if you need insurance buy only insurance, i.e. Term Plan. And invest in investments, not in insurance.

  • Hari March 13, 2012, 11:14 AM

    Hi Hemanth,

    Thanks for creating the awareness about LIC policy. The way you have started this article is awesome. :-)

  • Preeti March 13, 2012, 5:18 PM

    Hi Reader,

    I want your suggestion regarding the investment in public sector institutions.
    I wish to invest Rs.3000 PM. And I want intermittent returns along with the Tax savings. I wish to continue the policy for 20-30 yrs. Also I want a good amount on maturity.
    My age is 36

    Thanks,
    Preeti

    • Manikaran Singal March 14, 2012, 7:38 PM

      Go with PPF, you will get everything you want with investment of Rs 3000p.m

  • mm March 13, 2012, 5:31 PM

    I am 35 yrs single under the 10 percent tax slab. I already have a PPF account for tax 80c for 1lac. I am looking for a decent pension plan with fixed returns. The old Jeevan Dahara (in 2011) gave my mom thrice the amt on maturity x now a lifetime pension for an interest of almost 9.5percent on the maturity amt. I found this to be the best pension plan.
    Should I go for Jeevan tarang since am unsure of New Jeevan Dhara. Prefer lump sum payment.

  • chetan March 13, 2012, 7:28 PM

    Dear Sir,

    I have read so many article regarding investment in MF, SIP and Detb fund. Kindly provide me last 10-15 years return so readers will believe in the mentioned product.

    • Manikaran Singal March 14, 2012, 7:36 PM

      Though i m not sure what exactly you want me to provide, so just sharing with you sensex figure exctly 10 years before i.e on March 14’2002 – 3580 , which means till today i.e at 17919…sensex has provided annualised return of 17.47%.

  • rajib March 14, 2012, 1:47 AM

    mixing investement & insurance? – May G help you

  • su March 14, 2012, 11:03 AM

    Hi Manikaran,

    You point on “the proposed Direct tax code provisions of taking sum assured equals to at least 20 times the annual premium , only then that policy will be non-taxable at the time of maturity. As the DTC is yet to be announced and this policy has 10 years term so ambiguity is still there”

    If this change is announced, will it not be applicable to new policies issued after the announcement? If it is with retrospective effect, then policies maturing in the year of announcement will get affected too – and this seems a bit unfair.

    Regards.

    • Manikaran Singal March 17, 2012, 9:05 PM

      …Budget 2012-2013 has tightened the eligibility criteria for life insurance policies to qualify for benefits u/s 80C and 10(10)d. Now only those insurance policies where the premium paid does not exceed 10% of the capital sum assured will qualify for such deductions. This condition applies to policies purchased after 1 april ’12

  • Tejas Gwalia March 14, 2012, 3:59 PM

    Jeevan Vriddhi vs BANK FD
    Rs. 10 Lac in Bank FD @
    9.25%
    YR Principal Amt at yr end
    1 1000,000 10,92,500
    2 1095,000 11,93,556
    3 1199,025 13,03,960
    4 1312,932 14,24,577
    5 1437,661 15,56,350
    6 1574,239 17,00,312
    7 1723,791 18,57,591
    8 1887,552 20,29,418
    9 2066,869 22,17,139
    10 2217,139 24,22,224
    TDS @ 30% 4,26,667
    Net in hand 19,95,557
    Actual IRR 7.48%
    Rs. 10 Lac in Jeevan Vriddhi at age 25 Yrs
    Sum Assured 50,00,000
    Premium 10,15,450
    Tax Rebate @ 30% for 1 Lac 30,000
    Net outgo 9,85,450
    Guaranteed Maturity Benefit 20,09,479
    IRR on Gtd. Mty Sum Assured 7.39%
    Loyalty 2,51,185
    Total Returns 22,60,664
    IRR (compounding annually) 8.65%
    Apart from better returns the customer gets
    Free Risk cover of 50,00,000.
    On death- 50 Lacs payable whereas in Bank FD
    accumulated value paid with deduction of TDS
    Easy Liquidity – Loan/Surrender after 1 yr.
    Loan@ 10.25% as against >14% in the banks

  • vinay jaswal March 14, 2012, 4:39 PM

    Sir
    I am forward the details of my portfolio and requested to you please give suitable advice regarding investment purpose. Sir my goal approx 10 lakh required for daughter education after 10yrs and 20 lakh required for marriage after 15 yrs. please gives advice about my policy/funds which are good for investment and efficient to achive above mentioned goal. The details of my policy/funds are as under and sir also requested which funds or policy exit in my portfolio.
    1 ICICI smartkid –new unit linked plan – 12000 yearly
    2 Ing vysya new future perfect plan – 15000 yearly
    3 Reliance growth fund –retail plan- growth option – 1000 PM
    4 Reliance regular saving fund – 1000pm
    5 SBI Flexi smart insurance plan – 36000 yearly
    Sir I am awaiting for your response.
    thanking you
    Yours sincerely
    Vinay Jaswal

  • Manikaran Singal March 14, 2012, 7:27 PM

    Though i have just taken an overview of your calculations, i must say tejas you have done a good job to actually convince the prospective buyers that this is the best investment option available. Though i have my concerns to it which i’ve shared in the article above also.
    1. What if someone doesn’t need tax rebate? means if he’s exhausted the tax saing investment limit?
    2. What if DTC provisions( which is still not clear) make the maturity amount taxable at maturity?
    3. Is this the right policy for 25 years person to buy a life cover of Rs 50 lakh? This cover can be bought through online term plans with around 5 k of premium.
    4. What’s the use of liquidity if it is coming in the shape of loan @10.25% or surrender @90% of premium paid.?
    5. what if someone comes in lower tax bracket?

    Now let’s come to your calculations:
    1. you have calculated for person with 25 years of age.What if someone is of higher age? as mortality cost will rise so returns will be low.
    2. Since loyalty additions are not guaranteed so one can’t be sure of any figure for that matter.
    3. Risk cover is not FREE as you have mentioned. Investor will pay mortality cost towards it.

    I am sure this 10 lakh can be invested in a better combination of product with better , tax efficient returns and also with good risk cover.

  • Nandu March 16, 2012, 12:20 PM

    A OCI (Overseas citizen of India) card holder can not buy term life insurance as per the current term writing. I assume this is correct. In that case, this plan seems to be good for next 5 years, since you get 5 times the insurance and a good bank rate if nothing happens to you.

    The education system in India produces a lot of analysts and most of us thinks with if then else, what if, etc and try to arrive at some decision to buy. Well..do not break your head. Take life cool, if you have some money..invest and move on.
    Do not go to analysis is paralysis..mode. Critical thing to practice in life is to take decisions with the limited information available and move on with it.

    • Manikaran Singal March 21, 2012, 8:26 PM

      nandu…this is 10 years product. and now with the annuncements of budget provisions on minimum insurance premium and sum assured has been announced for tax benefits…this product has automatically lost its sheen.

      Analysis or no analysis, your financial life is in your hand.

  • AKASH March 16, 2012, 4:46 PM

    DEAR MANIK JI
    I HEARTLY THANKFUL TO U THAT U PROVIDE A FRUITFUL CALCULATIVE INFORMATION TO ALL,WHICH I REALISED SHOULD BE COMMUNICATE TO ALL.
    SIR I WANT TO KNOW WHATS UR OPINION IF ONE CAN INVEST 100%(01 LAC) IN PPF, WITHOUT HESITATING ABOUT FUTURE RETURN?

    • Manikaran Singal March 21, 2012, 7:48 PM

      PPF is a very good investment vehicle for debt allocation and tax saving. One may not select this only for tax saving but for other general investments also. But if the total investment capacity is only rs 1 lakh then one needs to do some calculations to find out the suitability.

  • Anil Sathe March 16, 2012, 5:54 PM

    Question : Can NRIs invest in Jeevan Vridhi ?

    • basunivesh March 21, 2012, 8:39 PM

      Anil-it is not clear from LIC whether NRI’s are eligible to invest in this scheme or not. Even LIC site not claiming any information about this. But I can give you information within day or two.

  • sanjay s mugade March 17, 2012, 4:25 PM

    Very nice lic plan with double benifet

  • basunivesh March 19, 2012, 6:20 PM

    Hi I want to comment for your point “Opportunity Risk”. You told better to invest in Equity Fund rather than this low yielding products. I agree, but for investor who is non aggressive then how can you recommend such product to him. Regarding Debt Funds, which funds give you around 10% return over the period of 10 year? What I want to point is, this plan is definitely a low yielding product. But the proportion of your portfolio which you recommend to invest in Debt products can be diverted into such products which give you around 7% to 8% return with little bit of life risk cover. I am not saying major chunk of portfolio but proportion of your portfolio. What you say?

    • Manikaran Singal March 21, 2012, 8:39 PM

      Basunivesh, i always believe that investments should always be flexible enough to rebalance whenever need arises. For debt investments advise, advisor should be having a clear view of the interest rate scenario and how to use the duration funds. If someone has been advised right to purchase a term insurance plan with adequate cover…why should he be advised to bear more cost or expense on insurance through these products and compromise on returns. MOreover since interest rates are already high in the indian market so for long term non flexible investments one may look at Tax free bonds or even these days Fixed deposits are also offering good returns. This product may lose its charm after April 1’2012 due to the budget 2012 provision on insurance premiums.

      • basunivesh March 22, 2012, 9:49 AM

        I agree what you told as Bond market is inversely proportional to prevailing interest rate of market. About flexibility, i think this plan have some extra features regarding liquidity. Even i agree that to go with term insurance which are cheaper. But when you compare the returns of any debt product for longer tenure with this plan, to the extent both looks almost similar. Hence I told what is wrong in investing? I too not promoting this plan. Just took the healthy debate on what you expressed in above post. According to client risk appetite we may refer this product who are more accustomed to non risk taking.

        • Manikaran Singal March 22, 2012, 6:01 PM

          Basunivesh, advising or not advising this product totally depends on the client and planner understanding.
          If a planner feels that adding this product will help client achieve his/her goal comfortably, then go ahead.
          If planner feels that locking in money in this product will not effect the overall requirement and future cash flow needsof client, then go ahead.
          I mean , being a planner you are a better judge and you can decide looking at all the parameters.
          Frankly, comparing other endowment products this product does not too bad .

          • basunivesh March 22, 2012, 6:20 PM

            Thats what I am trying to say :) We cant recommend this product to all, but only few clients who are risk averse and as on case basis. Yes I agree with the comment you made in last line about this product. Compare to other plans of LIC, this plan a bit good one.

  • Tejas Jariwala March 20, 2012, 1:47 PM

    Dear Sir, Its really good one article.

  • collin March 20, 2012, 2:53 PM

    hi
    recently i had come across about TATA ING LIFE Mahalife gold- the whole life plan as proclaim by the company and thought of taking for my daughter.now before i enter the deal i seek your advise/comments about the policy and request you to suggest any other policy that i can take for my daughter

    • basunivesh March 21, 2012, 11:41 AM

      Collin-Insurance is needed for the person who is earning. Your dependents will feel the heat of financial loss when something unexpected happens to your life. But if you take insurance on your daughter’s name and something untoward happens to her life means you will not feel the financial burden. So if your daughter is minor then it is better to cover your life to fullest by taking Term Plan instead of purchasing Insurance for your daughter. About whole life policies-These are traditional policies and main aim is estate creation. But drawback is low return and inflation is not a factor in such a products. Better you stay away from these or invest least % of your total portfolio.Hope I tried to solve your doubts. Happy Investing !!! :)

      • Manikaran Singal March 21, 2012, 8:53 PM

        Collin, its better to stay away from these plans. Insure your life through term insurance plan with adequate coverage and select the investments instruments which are more manageable, understandable and helps you achieve your short/long term goals. I endorse basunivesh’s views that your child does not require any insurance coverage, but you do.

  • Rajiv Mani March 20, 2012, 7:16 PM

    I want to know whether it is essential to buy a fresh LIC policy, for taking a Home Loan from LIC Housing Finance Limited. My agent is coercing me for new policy while I already have 03 LIC policy running without any default.

    Regards,

    Rajiv

    • amit seth March 21, 2012, 11:03 AM

      you really no need to buy further insurance either from lic or from any other co.
      for housing loan there is no such condition. ur agent is misleading u , but it is always suggestable to have insurance more than ur liabilities.

      • basunivesh March 21, 2012, 11:47 AM

        Raji and Amit-It is always good idea to cover your liabilities with Term Plans. So if you are taking Housing Loan then better to take the term plan or Mortgage related term plans (which usually your loan provider will issue during taking loan). Hence cover your life to the tune of loan. You mentioned you have 3 policies already with LIC. Number of policies will not matter your life risk, SA covered under all 3 policies is matters more. Hence ask your agent to calculate your Human Life Value or else you can do that activity by yourself with basic study after that according to that calculation better to cover your life risk first.

  • BINOD KUMAR JENA March 21, 2012, 8:54 PM

    thanks
    Manikaran

    ur article realy help ful for me.

  • nandu March 22, 2012, 12:48 AM

    With the new budget my understanding is in order to get tax free Sum Assured, the Insurance should be at least 10 times the one time premium. At present it is 5 times. For example jeeven vridhi is 5 times. How is this going to impact jeevan vridhi? Does this mean that, in the future, LIC will be forced to move to t0 the 10 from 5?

  • basunivesh March 22, 2012, 9:41 AM

    Nandu, I need to correct it what you told. Previously to get exemption under Section 80C of income tax related to insurance premium, Sum Assured should be 5 times of premium or in other words premium should be 20% of SA. For example, if you are paying premium of Rs.20,000 then SA should be 1,00,000. But now it get reduced to 10%. Means, suppose you are paying premium of Rs.10,000 then your sum assured should be 1,00,000.It is a good move and makes customers to concentrate on SA. LIC may change it or not. But policy holder will get this much benefit only related to life insurance investment as tax exemption.

  • nandu March 22, 2012, 12:51 PM

    Thanks Basunivesh for the correction.
    In Jeevan Vridhi, if I put 10L, I will get an insurance of 50 L for 10 years, which is tax free at maturity. In order to give the same kind of insurance in the future, LIC has to come back and say, you pay 5L, I will insure you for 50 L with tax free maturity. Does it mean that it is better to wait till the insurance agencies comes up with new policies.

    BTW, Is there a way to get a term insurance for a OCI (Overseas citizen of India) card holder who lives in India. LIC agents told me, term insurance is not given. I am not sure about other private insurance agencies.

  • basunivesh March 22, 2012, 1:21 PM

    Nandu-I am not talking taxation about maturity proceeds, I am saying the claim you will get by investing in life insurance under Section 80C of income tax. It is related exemption you will get towards your premium payment of Life Insurance (whenever you pay premium). Maturity proceeds are different thing. Dont combine the current change in rule to the maturity amount. Hope you got the point now. It is bad thing to wait for plans to launch and invest in after that. Instead you have lot of option like, to take term plan and invest in other avenues where you will get good returns and Section 80C benefit too under new rule. Please dont believe LIC agents especially when you are purchasing Term Plan with them. They are not eager to sell term plan. Instead they may offer you different plans. I am not sure about the rules too about OCI purchasing term insurance. Do your home work by calling each company after you selected the Term Plan. That is best idea. You can choose online term plan, in that case no one will be ready to help you in this regard. So better you do that yourself, in that way you can save money too by purchasing online :)

  • anuj khanna March 24, 2012, 10:02 PM

    hi, i want to invest approx. 1.5 lac in my parents name …father (dob-8-12-1946) …mother(15-7-1952)….insurance or return based investment????Also this money rec. is my fathers maturity benifit from a policy he took years back…please suggest a.s.a.p. thanks .

    • basunivesh March 25, 2012, 10:09 AM

      Anuj-As this money is from your father’s maturity from insurance and considering the age factor of your parents, I suggest you to invest in Senior Citizen Saving Scheme. Which is giving you good returns (9%). Tenure is 5 years but you can extend it to one more 3 years. But interest you receive is taxable. Hence look at taxation part too and decide.

      • Manikaran Singal March 25, 2012, 2:50 PM

        Anuj, you may also check Bank Fixed deposits. These days interest rates are good in the range of 9.25%-10% for senior citizens. you may chk with SBI or IDBI . Bank FDs are more flexible to operate. Yet, these are as taxable as SCSS.

  • Uday March 25, 2012, 12:31 AM

    please suggest me which LIC policy I can take ,, I want to save my tax , I want to take a 1 lakh single premium please suggest

    Regards,
    uday

  • basunivesh March 25, 2012, 10:04 AM

    Uday-It is good idea that you planned to invest. But just with the intention of saving tax dont invest in any LIC policy. Look at your goals like when you need money and how much risk you can afford. Accordingly you need to diversify your investment among the available options. My advice is instead of purchasing any LIC plan, better go with term insurance to cover your life risk first. Then with remaining money you can start to invest in PPF, Tax Saving FDs and ELSS (If you are comfortable with equity option and waiting period is more than 5 years. Lock in ELSS is 3 years. So atleast you need to wait for 3 years). Hope I resolved your doubt. Happy investing !!! :)

  • birendra xalxo March 25, 2012, 6:50 PM

    Is there any plan of lic wherein at the age of 35 years, you pay 108225 ( you can take this plan only in march )and get the loan in april 80000/- and double the balance amount (28225) in 8th year ? this is how one of the agents whose phone no. is 9810885137 narreted me. if its there it is a wonderful plan . please comment…….

    • basunivesh March 25, 2012, 8:58 PM

      Wow….Looks great :) But can you ask that agent to give the confirmation about “double the balance money in 8th year”? This is typical case of mis-selling. Leave the special comment he mentioned “Can only take in March” and get loan about 80% of what you paid, in the immediate next year. If we work out the remaining amount of Rs.28,225 double in eight years means return on investment will be 9% CAGR. This return after deducting the mortality charges (Either Endowment or ULIP) and other expenses means looks nice. Ask him to name the plan.

  • Vijaya March 27, 2012, 9:01 PM

    Hi Nivesh,

    Can you please advice me a good policy for investment purpose? I am not much aware of these thin lines about policies.

    Appreciate your reply.

    • basunivesh March 28, 2012, 10:07 AM

      Vijaya-Never ever club investment with insurance. Life Insurance is the product which you need to take for covering your life risk. So do that by purchasing Term Insurance. Remaining thing you can invest in FDs, Bonds, PPF, Gold and Equity Oriented Mutual Fund. But you need to choose the product for investment according to your risk appetite and time horizon of goal. Hope you got answer for what you have in your mind.

  • harikrishna March 28, 2012, 6:56 PM

    Hai,

    You are not the enemy of LIC, but, I think you are not guiding the people in a good way. Why because, whenever we advise somebody we have to consider the following points

    1. what is the saving attitude of that person
    2. what is his style in expending the money
    3. what is his financial position
    4. what are his responsibilities
    5. whether the risk oriented investments may suit that person
    6. whether he is vigilant in the maintaining his funds
    7. if some risk will happen to his investment, whether he has the capacity to recoup that amount
    8. there are so many other socialogical and psychological aspects which are considered accordingly

    So, if we consider all those things I think what is wrong in investing JEEVAN VRIDDHI.

    It gives

    1. Guaranteed return
    2. Tax free returns
    3. adequate insurance cover
    4. Liquidity by the way of loan
    5. security and safety
    6. best claim settlement experience

    Moreover one bird in hand is better than two birds in the bush.

    Investments in shares or mutual fund is only creating the assets not the investment. Investment which gives sure returns is wise.

    upto Higher middle class families it is always better to invest in LIC single or endowment policies.

    So many people might have come across with the experience that the only LIC maturity amounts were left with them after their retirement.

    LIC is participating in nation building activites which is the part and parcel of each and every body’s life. As an Indian you have to support LIC.

    IT IS NOT FOR THAT CAUSE BUT

    All LIC PRODUCTS are the best products if we compare the safe and secured returns.

    Thanq

    • :) March 28, 2012, 8:32 PM

      R u a LIC agent?

    • BasuNivesh March 28, 2012, 9:34 PM

      Harikrishna- What you expressed in first 8 points, comes under analyzing client’s risk appetite and his past experience. Great yaar!!! in top you are telling that we need to check client’s views but below without analyzing to which person you are recommending the product, you are telling to invest in LIC’s Jeevan Vriddhi. This looks contradiction to what you are expressing.

      About Jeevan Vriddhi’s positive points what you expressed, I want to give my explanation.
      1. Guaranteed return-I agree it gives guaranteed returns. But have u considered inflation too? What will be the cost of your present investment when you consider the inflation?? Suppose we consider the return from this plan is 8% CAGR and Inflation as 6% then the actual real return on this is 1.88% not 8%.
      2. Tax free returns-You will not get any deduction if you invest in this plan after 1st April 2012 as premium is 20% of Basic Sum Assured. From next year only 10% premium of SA will be eligible for deduction under Section 80C.
      3. adequate insurance cover-Adequate Insurance Coverage? Suppose if person earning 10 lakh PA then usual trend is to recommend him to cover his life for 1Crore. So to avail that much cover under this plan how much he need to pay?? He need to invest now Rs.20,00,000. Is it worth??
      4. Liquidity by the way of loan-Good to hear about liquidity. But with only option of having liquidity, we cant recommend to clients right??
      5. security and safety-I agree but it is only for the customers who are risk averse and who dont have past experience of Equity or any new avenues. Also for the customers who are ready to cough more at the cost of not taking risk.
      6. best claim settlement experience-Completely agree, even IRDA data shows LIC is top. Reasons may be lot. But anyhow this is good positive point.

      I didnt understand your point of differentiating assets and investment. You will create assets by investing. Without investment is it possible to create asset or wealth??
      About the mutual fund returns-I agree returns may differ from your expectation. But if you look at the history of Equity market not only of India whole global market, it is given you wonderful returns compare to other asset class. But you need to wait for longer time say like 10-15 years. Tell me who lost money in equity who waited for 1-15 years? If you want proof, I can provide you the link for your information or some data I have with me.
      About people experience having LIC as only return for their retirement-They might have got experience. But suppose you took LIC’s favorite policy Jeevan
      Anand for 10,00,000 now (I took this SA as you are talking about middle class), you may get approximately Rs.20,00,000 after 15 or 20 yrs. But what will be the value of that Rs.20,00,000 when he receives? May one or two year household expenses.

      For investor what social cause the company in which he is investing does not matters, the thing he looks for is safety, good return, liquidity and whether the investment money will meet his goal or not.
      Hope I answered your questions :)

  • JK Mohanty March 29, 2012, 12:33 PM

    Dear Hemanta
    Pls. tell me JEEVAN VRIDDHI agent commission.

    JK Mohanty

    • BasuNivesh March 29, 2012, 1:41 PM

      Mohanty-As I heard it 2%. Usually for all single premium policies LIC’s commission is 2%.

  • birendra xalxo March 30, 2012, 6:17 AM

    do not worry new investors . people are happy enough to invest in lic since 1956 whatever the reason may be. whereas the jeevan vridhi is concern lic has already accepted 50 cr SA from one of the leading bollywood actor ( i guest he might be smart enough to think before invesment )and many more to come .i guess minimum 10% return can be expected from this plan as lic has already cos. to pay 14% return.2% management expenses and 2% agents commission 1o % expected return.

    • BasuNivesh March 30, 2012, 11:03 AM

      Birendra-Wow!!! Great predictions :) I agree, since 1956 LIC existed and it created a superb brand itself. But in olden days investors not have many options to invest for, like mutual funds, e-gold and bonds(Awareness was less). But now so many alternatives are available. Then why to stick to LIC only? About one of the biggest bollywood actor’s investment. It is foolishness on the part of investor to follow that actor. May be his priorities are differ and he may be a top actor but how can you say that he is top knowledgeable person to invest in this plan? About return on investment, can you explain how you come across the figure 10%? In which company LIC is investing this money and how much they offering to LIC? What is the credit history and credit rating of the company where LIC is investing?

  • M.K.Panda March 30, 2012, 9:43 AM

    Who can be the proposer for lic jeevan vriddhi policy?

  • Anil March 30, 2012, 12:38 PM

    Dear All,
    In India as on date 31 Dec. 2011, the total AUM of Equity Mutual Fund is Rs. 161242cr. and Debt Mutual Fund AUM is Rs. 422403, so the asset allocation ratio of Equity:Debt is 28:72!!! So we can see how all industry is investing their money. After seeing this data I have many questions in mind for all investment advisers:
    1) If all you are all saying Equity is better than Debt then why it is not showing more money in Equity than debt, in above data?
    2) Equity market is very volatile and we have data that proven this fact that in 10yrs term market has given better returns, but is it any guarantee that equity will perform better in the future than Debt product? if WAR or Natural calamity happens, which sector will perform better Equity or Debt?
    3) In Debt you will never ever get negative returns but in Equity most of the time -ve returns only some times +ve returns and only if, you ignore the market and stay invested.. but only IF…….. you never know when will that time will come when my investment will get positive returns?????
    4) In life our goals are certain, the need is money for that specific goal is also certain, then why anybody should invest heavily in Equity market for all that goals. Why do you think only SIP in Equity Market will proved better than any market?
    5) Which Debt product do you think will beat the inflation 100%? Do you have any such product in the market?
    6) In my opinion, one should follow the rule what our investment industry follows – Invest in Equity market upto 30 -40% of your hard earn money and rest you should invest in Debt products, and I think LIC’s Endowment plans is the better options available in the market? Why –
    a) It creates your guaranteed money like a Bank FD, but on monthly savings, you need not to pay Rs. 10lacs to buy 10lac endowment policy. In term policy you are covering only the risk, not creating money for the future.
    b) LIC declare the bonus from remaing total surplus, so it’s like a divident to all policy holders from the investment which LIC is doing. I think LIC is very big player in both Debt and Equity market so LIC has the demanding power in both market. Also LIC is very respectable Institutional Investor in India. We should change the way to look at LIC, It’s not only largest Life Insurance provider but also Largest and respectable Institutional Investor, and has proven in the past that all decision taken in the favour of the policy holders and the our nation INDIA. so I request all of you who are always blaming about LIC, please give some respect, it’s our money for our country’s better future.
    c) If you minus the martility charges, accident benefit charges and service tax which now LIC pays from their pocket for old policies, you will arrive much much better tax free returns than any dect product in the country. (In debt product last 10yrs avarage taxable returns is 8.81% to 5.10% and after deducting the tax – It’s also not beating the real inflation.)

    In conclusion – one should park their money in various assets, you never know which assest will perform better, like currently Gold is performing better than equity for 10yrs. You never know the future but you should be prepare for all the possibilities. Please remember don’t rely on anybody’s comments or their views, do what you fill better for you. Financial Planner it’s not a Doctor who 101% knows better than us, In financial market everybody has to do homework before parking their money.

    About myself: YES I am a LIC agent and I have cleared my CFP Exam in Sept 2008.

  • BasuNivesh March 30, 2012, 1:37 PM

    Anil-Good to hear the background of your’s. Me too LIC agent and CFP. I will try to put forth my views on the issues you raised.
    1) About Debt:Equity ratio, India is among the first country who have population of having highest saving habit. But due to lack of knowledge or not availability of product knowledge we are not a great investor of Equity. That is the reason today low penetration in Equity market.
    2) About return on Equity-Tell me any example who lost money or got less return than Debt whose waiting period in Equity is more than 10yrs? If you give time to market it was given a impressive return. Lost are the people who does not have proper knowledge about product and advice. Hence need of the hour is proper knowledge and goal based investment planning not the product based selling.
    3) Even Debt product too are not fully risk free. May be the volatility is low to zero but risk is always present even in Debt market too.
    4) It is the foolish thing that for all goals you need to invest in Equity market. We need to invest according to our goal and risk appetite. Hence on this point I totally agree with you.
    5) I agree, their is no such debt product which can beat inflation. Thats why to beat inflation we need to diversify our investments and reach the goal.
    6) About proportion of investment in Equity and Debt need to be depend on client’s age, goal and his risk appetite rather than following a standard format for all investors.
    a) Yes we need to cover our life with term insurance and investment need to be done according to goal perspective.
    b) I agree LIC is big player. But need to update it’s system of service towards client centric and special attention need to be done to upgrade the major backbone of it’s sales force-Agents. I found few agents who are unable to judge the product are top most agents of LIC. Also in my hometown, one MDRT agent have huge penetration. Do you know how much offer he is providing to client to take the policy? 1st year whole commission. Dont know the future goals of those customers. Thats why he is rich year by year but poor investors in same situation. Why cant LIC curb such bad practices?
    c) I think LIC indirectly promoting sharing of commission. Example is, in March month why they pay agents commission twice or thrice instead of paying it directly in April? Reason is to utilize the money to grab the new business. Who is asking about such things with LIC??

    I totally agree with the points you expressed in your conclusion part. Hence what is the need of the hour is customer awareness and increase knowledge base rather than eager to sell product. I think that we are missing not only from Insurance industry (Includes LIC and Private players too) but even from Mutual Fund industry too.

  • HEMENDRA GUPTA March 31, 2012, 12:33 AM

    dear hemant,
    please advice me should i continue paying premium for ‘max amsure secure returns builder ulip-increasing simplified’ which i purchased in dec-97 fund value is just 50% of what i paid till date. this product was sold to me by amway agent misleading and hiding real facts. please let me know where i can complaint for the same.

  • Anil March 31, 2012, 12:45 PM

    Dear Basu,

    Let me clear to you that the ratio which I have given here is from AMFI site and I think it’s the investment which informed, learned and knowledgeble people do.

    1) About the risk – as you said YES their is the interest rate risk is their with debt product but they never gives you negative returns like equity market. One major risk with equity market is, there is no guarantee that when you need money in the future for your future goals that time market may be in good rally and you would get expected returns, so that your goal may not be fulfilled. so you need combination of Debt and Equity for all your financial goals. I think for Equity market, the future is uncertain but for debt market, the future is certain but with some interest rate risk is there.
    My dear friend, one doctor never complaints about other doctor even other doctor might have did wrong diagnosis, so please don’t use this platform to blaim somebody from our field. please.

    • BasuNivesh March 31, 2012, 2:01 PM

      Anil-I am not against the data what you put in your previous comment. I expressed reasons for low penetration of equity investment in India. It is also wrong thing to say that only “informed, learned and knowledge people” did that investment. I agree that debt returns will not be negative. Even I too told the same thing not to put all money in one basket. We need to diversify according to goal and risk appetite. About negative market return-when investor is about to reach goal Re-balancing of portfolio is answer. As investor nearer to his goal he need to move more his investments towards Debt from Equity.
      I respect the professional integrity you have. I am not using this platform to degrade some one. But just pointing the wrong things which is rampant in market today. It is not my motive to blame any one here. If it hurts you so much then sorry for that. Last thing if doctor (A) not pointing the wrong thing which other doctor(B) did to his patient then, in my view by not telling the truth doctor(A) is not doing justice to the patient who came to his hospital with the faith as god who can cure his disease.

  • HEMENDRA GUPTA March 31, 2012, 3:13 PM

    Dear Basu,
    I appreciate your views/advice. Please advice me should i continue paying premium for ‘max amsure secure returns builder ulip-increasing simplified’ which i purchased in dec-97 fund value is just 50% of what i paid till date. this product was sold to me by amway agent misleading and hiding real facts. please let me know where i can complaint for the same.

    • BasuNivesh March 31, 2012, 5:05 PM

      Hemendra-This being the ULIP and the first year charges are around 25% (including all), hence it is showing you the less return as of now. I advice you to stop to pay the further premiums. I didnt get the details about the exact fund performance. Hence as of now I am unable to judge and advice you to continue. Plainly we can say-Stop premium paying, wait for market uptrend and withdraw money or if at all the ULIP is not performed well even in good times too then better to withdraw it. I am too eager to look forward the few comments on what Hemendra raised. Anybody??

      • HEMENDRA GUPTA April 1, 2012, 1:51 AM

        Dear Basu,

        Thanks for your prompt reply. Let me correct, I Year charges …….. more than 70%, II Year / III Year charges……. more than 50% and IV Year not less than 25%, this year I am not paying but till date I paid more than 5 lacs , FV as on date is less than 2.5 lacs.
        I want to take an action against AMWAY along-with Max New York, please let me know What and How can I do ? Date of Purchase….Dec 07

        • BasuNivesh April 1, 2012, 9:24 AM

          Hemendra-When I searched for this plan details, I found the rates which I mentioned. This is too much if the expenses are really as you shared. First contact both the companies, if they not in a position to heed your request then better to move to IRDA

  • Dilip March 31, 2012, 8:36 PM

    Dear Mr Manikaran,
    While evaluating Jeevan Vriddhi plan please consider that after one year loan amounting to 63% of the Single premium paid is available. So, if you invest a minimum of Rs.30,000/-, after one year you get back Rs.18,900 (90% of 70% of Rs.30,000). The loan will carry interest of 10.25% payable half yearly. The loan amount if invested for 9 years at 9.25% interest in a bank will yield a maturity value of Rs.43042/- out of which after repaying loan of Rs.18900, the balance available will be Rs.24142/-. The total interest that will be paid to LIC for 9 years @ 10.25% will amount to Rs.17435/- (i.e. Rs.1937 X 9 years). The net amount left out will be Rs.6707/-. Assuming 30 years age of the policy holder, the guaranteed maturity value payable by LIC will be 58248/-. Thus, the surplus available will be Rs. 58248/- +6707 = Rs.64955/-. Now, the opportunity loss of interest on recurring payments of Rs.1937/- paid as loan interest considering that a recurring deposit of Rs.1937/- offering 9.25% will amount to Rs.9763/-. Secondly the opportunity loss on Rs.30,000/- invested for one year at 9.25% interest will amount to Rs.2873. Thus, the net surplus left will be Rs.64955-9763-2873 = Rs.52319/-. The third opportunity loss will be the interest lost on net investment of Rs.11,100/- for 10 years at 9.25% which will amount to Rs.16599/-. Thus, the remaining amount available will be Rs.52319 – 16599 = Rs.35720/-. From this amount let us deduct the net investment of Rs.11100/- made by us. So the balance left will be Rs.24620/-. which is NET GAIN. Besides, there will be tax benefit and of course whatever little bit of loyalty addition and 5 times insurance i.e. Rs.1,50,000/-.

    • BasuNivesh April 1, 2012, 9:22 AM

      Dilip-Good Permutation and Combination :) But after all these work out can you please share with us how much is the return on initial investment?

  • Dilip April 1, 2012, 9:28 AM

    Dear Basu
    As you can see from the calculation an policy holder is left with a NET GAIN of Rs. 5720/- without a penny from his pocket and freely enjoys insurance cover of Rs.1,50,000/-

    • BasuNivesh April 1, 2012, 11:07 PM

      Dilip-I dont know what finally you want to explore?? People who are in financial field can understand to the extent. But can a common person understand these things?

  • Dilip April 1, 2012, 10:26 AM

    Particulars Pay Ins Pay Outs
    Single Premium Paid 30000
    Loan Availed after one year 18900
    Total Loan Interest Payable
    (Rs.18900 X 10.25%) for 9 Years 17435.25
    Maturity Value of Rs.18900/- invested
    for 9 years 9.25% interest 24142
    Repayment of Loan 18900
    Guaranteed Sum Assured 58248
    Opportunity Losses
    (a) Interest lost on Rs.30,000 invested for
    1 year @ 9.25% interest 2873
    (b) Interest lost on net investment of Rs.11100/-
    made for 10 years @ 9.25% Interest 16599
    (c) Interest lost on recurring payments of Rs.1937
    made towards Loan Interest (Assuming monthly
    recurring deposit of Rs.162/- per month for
    108 months @ 9.25%) 9763

    Total Pay In/Pay Out 101290 95570.25
    Net Gain 5719.75
    * Loyalty Additions, Tax Benefit (Whatever available),
    Life Cover of Rs.1,50,000/- for 10 years are
    additional gains.
    * Above Calculations for person aged 30 years
    * All that a person has to do is first take a Jeevan
    Vriddhi Policy and after one year avail loan and invest
    the same in bank for 9 years (That investment will again
    given him benefit under 80C)
    I invite comments of all discerning users of your website
    on above analysis. See Sir, any LIC policy if analysed without
    the LOAN option will never compare with other investment
    avenues. If there is no loan on LIC Policy, no LIC policy is
    worth taking with the exception of TERM PLAN. Even
    Term Plan of LIC is very costly as compared to Private Insurers

  • Dilip April 1, 2012, 10:40 AM

    Sorry for the earlier post. The details are not clearly reflected.
    I once again present below my views of LIC Jeevan Vriddhi
    and request the discerning visitors of your website to kindly
    offer their further views / comments on my analysis and
    advice whether it is worthwhile to take this policy.
    Particulars Pay Ins Pay Outs
    ——————————————————————–
    Single Premium Paid 30000

    Loan Availed after one year 18900

    Total Loan Interest Payable
    (Rs.18900 X 10.25%) for 9 Years 17435

    Maturity Value of Rs.18900/-
    invested for 9 years 9.25% 24142

    Repayment of Loan 18900

    Guaranteed Sum Assured 58248
    Opportunity Losses
    (a) Interest lost on Rs.30,000
    invested for 1 year @ 9.25% 2873

    (b) Interest lost on net investment
    of Rs.11100/- made for 10 years
    @ 9.25% Interest
    16599
    (c) Interest lost on recurring payments
    of Rs.1937 made towards Loan Interest
    (Assuming monthly recurring deposit
    of Rs.162/- per month for 108 months
    @ 9.25%) 9763
    ——————-
    101290 95570
    Net Gain 5720
    So without investing a penny, a policy holder gains Rs.5720.
    Additional benefits
    (a) 5 times insurance cover
    (b) Any loyalty addition
    (c) Whatever little tax benefit
    (d) Tax benefit on deposit made with bank for
    over five years under Section 80 C

    • Kuashal Gandhi August 22, 2012, 3:41 PM

      Dear Dilip,

      You have calculated opportunity cost of Interest lost on Rs.11100 for 10 yaers and also Loss of Interest on Rs.30000 for one years. While Rs.11100 is alraedy included in Rs.30000 in first year, So net Investment of Rs.11100 is only for another 9 years.

  • KAUSHIK April 1, 2012, 5:15 PM

    dear mr.singal,u calculate the maturity on the age of 20 nd 35 yrs. u never tell about thecalculation in lower age i.e. age 8yrs of child.if u calculate at the age of 8 yrs child of Rs.100000,then premium will be Rs.101545.00, after 10yrs the guaranteed return will be Rs.204414.00,nonguaranteed amount may be 25000.00,it has been assumed as per the loyalty of death s.a. jeevansaral policy,which has been launched 10 yrs back in lic. how u re so pesimistic? lic pays dividend to govt.of india in fy 2010-2011, Rs.1137.99cr,its total asset is Rs.1317416.10cr,its total life fund Rs1151200.00cr,which is peoples money for the peoples welfare,should i think lic will cheat me?moreover u also wrote that u showed enough calculation to reject jeevanvriddhi, it is astonishingly ridiculous either u solicit the buyer impertially or promote some other company knowing fully well about the market scenario.

    • Manikaran Singal April 2, 2012, 11:45 AM

      Kaushik, i have just used the calculations as shown on the LIC website. Person with 20 & 35 years of age was not used intentionally.
      Neither i have written anywhere that LIC will cheat , nor i am promoting any other company. I have just tried to do some basic calculations as per the data provided on LIC’s website and want people to take informed decisions keeping in mind the Goals,risks and opportunities .
      You are true that in this product younger the investor more will be the returns and this is because of less mortality charges. But pls understnd that why does a child of 8 years needs insurance . As far as i understand, life insurance is meant for those with financial dependents.

      • KAUSHIK April 2, 2012, 10:11 PM

        dear mr.singhal, i never treat this policy as an equipment of insurance,because it is the extra benefit in this policy just like a liril soap with surf exel 1kg pack!
        if ur child is of 8yrs, u take this policy on his life nd dated back this policy to 02/05/2011. what will u get= the same maturity amount with in 09yrs instead of10yrs, and may also take loan upto 90% of ur deposited amount from 03/05/2012. after that u may deposit that amount to the plan jeevan ankur of lic(with single premium) on ur life u may get better result!no need to go to the other option.

        • KAUSHIK April 2, 2012, 10:41 PM

          sorry there is some wrong information,not the 90% but 70% of surrender value= granted loan, inspite of this u may take some profit, though the term of jeevan ankur should little bit longer. or invest to the jeevansree-1 with single premium of 15 yrs term. u will be more benefitted!

  • Manikaran Singal April 1, 2012, 8:31 PM

    Dilip…your calculation itself says ..not to mix insurance with investment. Life itself is too complex..why to increase the complexity with such kind of calculations..and that too just to prove the point.
    Buy pure insurance to cover all financial liablities and buy investment products to achieve a particular defined smart goal. keep investments simple so that with the change in finanial situation you could be able to make necessary changes in the product if at all required. Just because you can take loan on any product shoould not be the criteria, and this also looks awkward if one takes loan just to invest in fixed deposit.
    With losing the tax free status at the time of maturity, i feel that this product has lost all its attractiveness now.

  • Chethan April 2, 2012, 8:19 AM

    All I was looking for was reviews on Vriddhi and looks like I stumbled upon a contra-point conversation, I am now not sure if investing in this worth it. Typically I withdraw in such situations, but I want opinion of some of the masters in the above comparison. Say I want to invest Rs. 50K and ofcourse in this case I am not looking for a great Life cover as I have a term-insurance in place..all I want to invest in here is to divest my investment:

    – Is it worth to invest in the new fiscal FY 2012-13 with probably no rebate under 80C and get maturity amount taxed to the most. I understand FY 12-13 waives off any benefits under 10(10 D).

    – Should I have invested in the previous FY 2011-12. LIC will accept investments for previous year over next couple of days. Am done with all my tax saving so I wont be able to claim rebate under 80C. But under 10(10 D) I am not convinced the maturity amount will remain tax free.

    Help me understand please!

    • Manikaran Singal April 2, 2012, 11:59 AM

      Chethan,
      Before zeroing on to any investment policy, you need to understnd as to which asset class its going to invest furthur in. There are only 4 asset classes where one can invest which are Equity, debt, gold and real estate. Now check onto your risk profile, goals and time horizon for which you want to invest in and based on that select a particular asset class.
      now, for e.g you have selected debt…as we are talking of a debt product. Check out the atlernatives avaialblelike debt mutual funds, Fixed deposits, Post office schemes etc. and post tax return potential.of each instrument.
      All the above calculations will lead you to a suitable product for your investment out of your hard earned savings.
      You have understood it right that there will be no tax benefit of 80c and 10(10d) available on insurance products with less than 10 times of insurance cover on premium paid, if purcased after 1 april’2012

      • Chethan April 2, 2012, 1:07 PM

        Many many thanks @Manikaran, I have followed a very similar pattern in arousing interest in LIC-JV plan. I might as well ‘invest’ a reasonable amount..

  • Kunal April 2, 2012, 11:14 AM

    Dear Sir,
    I am thinking of investing in LIC ,Jeevan Vriddhi that too in my wife’s name. Can you please give your valuable opinion about benifits of investment , return and the life cover. I am thinking of investing 50K and my wife is 28yrs..
    Thanx in advance for your valuable opinion..

  • sathya narayanan April 3, 2012, 7:57 PM

    Dear Sir,

    I have applied for Term Insurance-HDFC CLICK 2 PROTECT Online term plan and paid the premium ,under gone medical test and completed.I got letter from HDFC stating that i need to pay extra premium as i am smoker category.To my knowledge i have never smoke.
    Three years back i have taken a term insurance with same HDFC and carried out medical test with non smoker category.As i wan to increase my premium i have taken up without canceling the existing policy.
    In addition to the above i cross verified with the medical lab they informed me i have cleared in all respects.
    Is there is a special test to identify smoker category?Please suggest me whether i can approach the consumer forum ?
    thanks

    sathya narayanan

    • Anil April 4, 2012, 11:11 AM

      Dear Sir, It seems HDFC doens’t believe your declaration you must have given in the form. Term Insurance is for your family if something happens to you. When you alive you doesn’t know where to go for complaint against the company, What will happen to your family if claim happens? do they know what is the process and where to go, to get the claim money from the company? And what excuses your Insurer might be give to your family at the time of claim? This is the real trouble when you buy online term plan to save money. When you buy term insurance which is already a cheaper plan to protect your family, please buy it from some reliable agent, so he will take care of all of these things. The money you are savings on the premium buying online term plan might be turn a heavy burdon on your family if your claim rejected for some silly reasons. Think about it.

  • KAUSHIK April 4, 2012, 1:20 AM

    DEAR MR KUNAL, IF U PAY Rs.50000.00AT THE AGE 28, UR PREMIUM WILL BE Rs.50000.00+Rs.772.00(SERVICE TAX) ieRs.50772.00, UR GURANTEED RETURN AFTER 10 YRS WILL BE Rs.98559.00 + loyalty addition@10% may be 243.00 ie,243.00multiplied by50 ie Rs12150.00,the total return isRs.110709.00+OR-. IRR=8% MOREOVER U ENJOY 250000.00 INSURANCE THROUGHOUT 10 YRS. TO KNOW MORE CONTACT ME 09433334931

  • harikrishna April 5, 2012, 6:27 PM

    Hello Brother Basu Avinash,

    How are you.

    As I was very busy I couldn’t come to you. One of our friends has given a good calculation and best example how a Jeevan Vridhi Policy can be utilised for more returns and insurance. After some discussion you had made a comment how can a common man can know all those calculations. If you accept those lines written by you then I will ask you a question HOW CAN A COMMON MAN UNDERSTAND THE LANGUAGE OF EQUITY. And also you have said that the awareness of equity market doesn’t prevail among the people. I think the well known , adept and skillful person also cannot give assurance on equity returns like which film will be a HIT as there is no Formula. It is only 90% luck and 10% knowledge. And you have also said that who had lost money in equity – bhai saab – how many people lost their comfortable lives by investing in equity. Investment in equities is not a fashion to be adopted as and when it is only a passion. It doesn’t suit to our Indian conditions where the wealth is at 20% and poverty with 80%(here also 20/80 rule works hahaha). Investing in equity is good but at the same time investing in safe avenues like Jeevan Vridhi (where 8% interest is guaranteed and 5 times insurance is promised) also required.

    Still you are not satisfied … please

    The traditional type of Savings only saved our nation recently. It is always good for any person expecting a good return not high return(all relegions say samething).

    You never meet the Inflation with any type of investments( as there are so many untold reasons which we cannot expect). We have to put our eggs in different baskets. among those JEEVAN VRIDHI is one BASKET.

    INVESTMENT IN EQUITIES IS NOT PANACEA.

    So my dear brother please analyse anything in a positive way and advise to whom it suits. Please don’t give negative publicity like ” think twice ” because it is also a good product to so many people.

    Lastly please enlighten me what is the difference between risk cover and risk coverage(??)

    Thank you.

    • BasuNivesh April 5, 2012, 6:50 PM

      Harikrishna-Thanks for accepting me as your brother :) “Equity” no common man understand this word, thats why what I am pointing is low penetration. Hence need of the hour is education to investors brother. I think about loss in equity market, you are concentrating on the persons who are day traders, speculators or short term investors. I have complete data of 1979 to 2011. Where in persons who invested for longer never lost whatever may be their market condition. If you want that information, please visit my blog where i wrote on the article on same issue titling “Equity-Few points to remember before investing.” I am not here to promote my business or blog. I am here for healthy discussion. If you provide me your mail id, i will send that data to you. It clearly shows, persons whose waiting period is 15 yrs or more they never lost in equity market whatever may the market condition.

      Brother, before judging about my views on Jeevan Vriddhi, please refer the few of comments i made about the jeevan vriddhi. Even in my blog, i mentioned it as good one. But how many agents analyse clients whole portfolio and advise them to invest one egg of their basket into this plan??
      When client is ready to invest Rs.5,00,000 how many agents with open heart tell to their clients not to invest whole money in this plan instead invest part of it?? Everybody is eager to grab the business, then what is situation of client??

      I agree Jeevan Vriddhi may be one egg of your basket, but how you sustain inflation I dont know. It is left with readers of this blog to judge who is right :) about risk cover and risk coverage are same brother, may be when writing i might have used different words but end meaning is same.
      Now let the readers of this blog decide which is good way to invest :)

    • Anand April 10, 2012, 6:55 PM

      LIC Jeevan Vriddhi has lost all it charm with the new taxation that came into effect on Apr 1. Someone at age 8-12, not expecting to earn in 10 years, alone can benefit fully. Else it has less reason to be in anyone’s basket. PPF/EPF/VPF are better alternates.

  • sameer shah April 10, 2012, 11:57 AM

    Hi Hemant,

    How do we calculate the returns of our endowment policies?? hw do we decide on further continuation or surrendering it?? I am talking abt LIC Jeevan Shree, LIC Jeevan Saral & LIC Jevan Asha II ??

    • Purvesh Mehta April 14, 2012, 4:36 PM

      Returns from LIC policies are not fixed. They announce bonus every year and that too change based on their profit experience. You can login to LIC and register all your policies to get the bonus amount of your policies. You can download bonus sheet of LIC from licindia.com. And calculate yourself how they announce bonus.

      Thanks,
      Purvesh

    • Vivek K April 14, 2012, 7:30 PM

      Easier way is to go to LIC office or contact your agent. Tell them you want to surrender the policy, how much money will you get back?

  • Mark D' Almeida April 16, 2012, 12:41 PM

    There’s a great saying in my native language; if I translate it says – “once the patient is well, the doctor is dead”!. Which is true of Agents. Once they get you, they very easily forget you (because, they get their commission all through you policy) and Insurance companies, least bothered or customer friendly. Their job is to make it as difficult and more their morals, greater the default, greater their PIE.

  • harikrishna April 18, 2012, 6:46 PM

    Hai,

    Jeevan Vridhi has still charm. HOW

    If any person invests 100000 towards Jeevan Vridhi Single premium and after 1 year he can avail loan upto 63000. So the balance amount left with LIC is only 37000. coming to the point you had lost 1 year interest i.e. 10000 and you have to pay interest on 63000( this can be paid through the guaranteed maturity SA + LOYALTY ADDITION). definitely you will get back your 37000 after 10 years period. Then you had lost interest on 37000 for 10 years.

    you had lost 10000 initial interest loss and interest on 37ooo/-

    Now we will findout what are the benefits.

    1. 500000 insurance. you have to pay atleast 5000 per year as term assurance premium for this. If you treat it as recurring deposit for 10 years you will get atleast 75000/- if nothing is happen to you in term assurance this amount is a loss. so loosing 75000 and getting 37000 back which is benefitable.

    2. If you take term assurance and unfortunately you have forgotten paying premium what happens. You have to undergo medical for reviving the policy. Premium may increase. If any risk happens in the mean time nothing is payable. always we should be vigilant in paying the premiu.

    3. Just pay the single premium through this policy and take loan after 1 year and forget about that it will give 10 years peace . No heripheri of payment of premiums and no monetary loss.( please don’t compare with share market)

    4. LIC claim payment ratio is 98%. No doubt about company and payment of claim.

    5. I can suggest if you want more insurance if you have money go for single payment and take loan after 1 year keep only 37 % definitely there is no loss.

    calculate at your end and analyse all pros and cons . then only decide.

    IT rebate forget about this. with out IT rebate also you will gain.

  • Sanjeev Chauhan April 19, 2012, 1:30 AM

    Dear Manikaran,

    Can you advise on below –
    Requirement Amount Time Frame / 2012
    1. Daughters education 1 C 10 Y
    2. Daughters education 1 C 14 Y
    3. Daughters marriage 1 C 14 Y
    4. Daughters marriage 1 C 18Y
    5. Two Houses 2 C 22 Y
    6. On Retirement 4 C 22 Y

    7. Pension on Retirement 1 L / M 22 Y

    Total Req 10 C + ( As in Sr. No. 7)

    OTHER ESSENTIALS
    1. Life Cover 2 C Immediate
    2. Medical Cover 10 L Immediate

    What you have –
    Commodity Worth

    1. House (D) 1 C
    2. House (V) 50 L
    3. House (S) 50 L
    4. Land 6 L
    4. LIQ’DTY 50 L

    Total Worth 1.5 C

    A. Annual Income from all sources – 36 L
    B. Annual expenses including all ( 2 L Holiday) – 8 L
    C. Annual Investment (includes Debt, Equity, Gold , Real Estate) (A – B) – 28 L

    Kindly advise investment scheme / portfolio.

  • Suresh April 19, 2012, 11:06 PM

    Please do not buy any policy for investment or tax saving purpose. Bank FD will gives you more return. If you need a life cover, buy a term plan with good cover. Be aware of the lucrative promises made by any of the Insurance company.

  • Ashok May 7, 2012, 11:02 AM

    Dear Sir,

    Please share your views on DLF Pramerica Assure Money +.

    Brgs,
    Ashok Kothari

  • ritesh shah May 29, 2012, 7:52 AM

    To,
    respected sir,
    my age is 32.
    i have taken the jeevan vriddhi policy from my agent before 1 month, the policy value is 1 lac. i told my agent to give me that policy in single policy( i am not knowing this policy gives 3% additional incetive for single premium of 1 lac. when the policy i will take) but my agent is forcefully giving that policy in three part (30,000+30000+40000) in three different agent code, same date. few days back i come to know that if i will take that policy in single premium of 1 lac. i will get 3% additional incentive.

    sir, i feel that the agent cheat with me.
    can you advise me, what can i do the legal action for that agent

    thanking you

    • Mark May 29, 2012, 11:30 PM

      First of all Insurance is humbug and for people with pessimistic views in life. Agents are biggest CHORs. Better bury your money on the back yard:

      a) you’ll have it whenever you want it (even at the middle of the night)
      b) enjoy your money while being alive
      c) you won’t be so stupid to think that there exit anything called “LIFE INSURANCE”. Rather it is “DEATH INSURANCE”.

      I know in Germany people go & book their grave yard & the funeral type. In in all insurance companies try to do that for you; ensuring that you die to receive benefits by others.

      Wake up man!

  • nishi June 14, 2012, 4:38 PM

    Is there any article on Jeevan Anand ?
    I could not find any info on this and need some review on the same, if possible please guide as the agent said sure interest rate of 6%, that is :

    Maturity Benefit : SA + Sum of Premiums Paid + 6% interest compounded annually.

    Death Benefit : SA + Premiums (total paid premiums) + 6% interest

    Besides above, SA will be paid to nominee in case the insured person dies before the age 70.

    Although I am convinced not to buy this plan (bcoz I am getting a very good term plan). Still your guidance needed to understand Jeevan Anand, is it real anand ?? :)
    Y

  • Rejin John May 11, 2013, 10:20 AM

    Dear sir,
    Is the jeevan virdhii still running?

  • babanna July 10, 2014, 11:48 AM

    sir, i earn a salary of 3 lakhs per year. i am now aged 55 years. i have two kids who are 24 years and 18 years (one boy and one girl) and a wife (home maker). I had a policy of Rs 50000/- which is matured. Now i do not have anything like shares, debentures,fixed deposits etc except a house with rental income of rs 96000 per annum. I keep good health with no sugar, diabetes, chronic ailments so far. I am not a smoker, boozer, etc. What is the best policy i can buy to cover my family members, keeping in mind my daughter and son education and umbrella for my wife and me in case of my retirement (private service). Please advise me as soon as possible. Rgds

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