In India we have looked insurance as a tax saving vehicle. That’s why most of our money goes into this instrument in the month of January, February and March. For the same reason, insurance companies and agents’ earnings rises manifold during these months. And for the same reason, our finances are really stretched during these months. Every year insurance companies launch new products in this period but I am not sure why LIC relaunched (may be because of new regulations & changes in mortality rates) “Term Plans – Anmol Jeevan II & Amulya Jeevan II”.
Image courtesy of cooldesign / FreeDigitalPhotos.net
Why Term Plans?
We always believed insurance is to cover life risk and not for investment. To understand more about insurance read – what is insurance? Because of this, we always recommend term plans, as their only purpose is to cover life risk. The benefits in the case of term plans are received only upon death of insured person. These are the least expensive policies & there is no comparison with investment based insurance plans.
Basic Features of Anmol Jeevan II and Amulya Jeevan II unraveled
LIC has recently launched two term plans – Anmol Jeevan II and Amulya Jeevan II. (discontinued the old ones).
- Both Anmol and Amulya Jeevan II are protection plans giving only death benefits during the policy term.
- No other benefits – survival benefit, loans or surrender values are applicable.
- The sum assured for Anmol Jeevan II ranges from 6-24 lakhs (increments of one lakh)
- Amulya Jeevan II comes into picture when sum assured exceeds or equals 25 lakhs
- Important difference is the sum assured but premium paid per lakh for Anmol Jeevan is approximately double that of Amulya. It means an Aam Aadmi who insures less than 25 lakhs has to bear more burden than the high networth individual.
- Income Tax Benefit – Available under Section 80 C for premiums paid and Section 10 (10D) for Death claims
Are LIC Anmol Jeevan II and Amulya Jeevan II old wines in new bottles?
Whenever LIC, the biggest and the oldest life insurer, comes up with new policies, there is a lot of buzz around them. Let us see whether these term plans have something new to offer. Here is the comparison table of new term policies with the old policies.
At a first glance the basic features of LIC’s latest term policies look similar to the old ones. But the important points to note are :-
- Premium is definitely lower in comparison to older policy.
- The premium paid for term insurance greater than 25 lakhs is a lot lesser than the old plan.
How do these policies fare against their competition?
Even though the new LIC term policies seem to be faring better than the old ones in terms of premium payment, let us see how they compare to the other insurers ICICI prudential – iCare, HDFC Life –Click2Protect and SBI Life – Smart Shield.
- For insurance of 15 Lakhs – LIC is charging close 60% more on annual premium than iCare and Click2Protect.
- For insurance between 25 and 50 lakhs, LIC managed to reduce the premium this time. Even then the private insurers are charging approximately 15% less on annual premium paid.
- For insurance above 50 lakhs, term plans iCare and Click2Protect fare lot better than LIC.
Should I buy LIC Anmol Jeevan II or Amulya Jeevan II?
Private insurers especially HDFC life and ICICI prudential are faring far better by charging less for more insurance. But even with premium reduction on their annual term plans, LIC new term plans still have a long way to go, if they have to compete with its alternatives HDFC Click2Protect and ICICI Prudential iCare. If you are looking for offline term plans – premiums are competitive.
According to the recent IRDA statistics, the trends indicate HDFC life and ICICI prudential are catching up with LIC in terms of claim settlement. The quality difference between LIC and these private insurers seems to be only in our mindset.
We put forth all the positives and the negatives of LIC new term plans. It is up to you to decide whether you are willing to pay more for LIC brand.
Any queries in relation to existing or new insurance policies will be highly appreciated. We are looking forward to hearing from you in our comments section.