Traditional life insurance plans are opaque, offer low life cover and provide guaranteed poor returns. Insurance companies try to package products in new ways to get investors to invest in these plans.
A traditional life insurance plan, especially a participating plan, is so opaque that it becomes difficult to assess how the investment performance of the insurance company translates into returns for the policyholders. It is a black box. You have to be content with what the insurance company offers you.
The guaranteed low return of such plans is so conveniently shrouded in complex jargon. I do not think there is any other financial product where the benefits of compounding (e.g. simple Reversionary bonuses) are shrewdly undermined.
Keywords like “Bonuses” and “Guaranteed Benefit” only complicate decision making. The plight of an average investor only increases with misaligned incentives for the intermediaries. To be honest, it is not possible for an average investor to deconstruct the plan and understand what he/she is getting into.
As discussed in my post on LIC New Money Back plans, these plans make for excellent sales pitches. As a customer, you are hardly ever offered the true picture. You wouldn’t purchase such plans if you were told the truth.
I have always maintained that traditional life insurance plans are better avoided.
I had done a detailed post on LIC New Money Back plan-25 years and advised investors to avoid such plans. In this post, I will review another plan from LIC: LIC Jeevan Tarun.
Read: How (not to) invest for Children’s education?
About LIC Jeevan Tarun
LIC Jeevan Tarun is a participating non-linked limited premium payment plan and has been structured to help you save for children’s education and marriage.
Interesting (and the worst) part is that life insurance is on the life of your child.
Let’s see if the plan is worth purchasing.
Review: LIC Jeevan Tarun: Salient Features and Conditions
- Minimum Sum Assured: Rs 75,000
- Maximum Sum Assured: No limit
- Minimum Age at entry: 90 days (for your child)
- Maximum Age at entry: 12 years
- Age at the time of maturity: 25 years
- Policy Term: 25 minus Age at Entry
- Premium Payment Term: 20 minus Age at Entry
If your child’s age is 4 at the time of purchase, you will have to pay the premium for 16 more years and the plan will mature 21 years later (after your child turns 25).
LIC Jeevan Tarun: Death Benefit
Life cover is on the life of your child.
Death benefit depends on the date of commencement of risk. Any reasonable person would assume that risk will commence when you purchase the plan. Unfortunately, that’s not the case with Jeevan Tarun.
Under Jeevan Tarun, life cover commences once your child turns 8 or two years from the purchase of the policy, whichever is earlier.
If the policyholder (the child) dies before the date of commencement of risk, LIC will simply return the premiums paid (excluding any premium paid for the riders). LIC will not pay the Sum Assured.
If the policyholder (the child) passes away after the date of commencement of risk, you will get 125% of Sum Assured + Vested Reversionary Bonus + Final Additional Bonus, if any
There is an option to purchase Premium Waiver Benefit Rider. If you purchase this rider, all the future premiums will be waived off in the event of your demise (proposer’s demise). I wouldn’t pay too much attention to this aspect because you could have simply purchased a term plan on your life. Proceeds from that term plan could have provided for premium installments even after your demise.
LIC Jeevan Tarun: Survival/Maturity Benefit
There are many ways in which survival benefits are paid. You can choose one of the four options.
In Option 4, the insurance company will pay 15% of Sum Assured every year after completion of 20 years of age (on the policy anniversary following the child turning 20 years) for 5 years. Remaining 25% shall be paid at plan maturity.
In addition, your child will get Vested Simple Reversionary Bonus and Final Additional Bonus (FAB), if any, at the time of maturity.
As discussed in the post on New Money Back plan, simple reversionary bonuses are announced every year while the Final Additional Bonus is applicable only in the year of demise or maturity.
FAB depends partly on your luck. If no FAB is announced in the year of maturity/death, you get nothing (as FAB).
Let’s look at the issues with LIC Jeevan Tarun.
Issue #1: Life Insurance is on the life of your child
Life insurance is on the life of your child.
Could anything be more stupid?
Don’t you purchase life insurance to ensure that your children’s needs are taken care of if something were to happen to you? If something were to happen to you while Jeevan Tarun was in force, there shall be no payout from the insurance company. Why? Because life insurance is on the life of your child (and not your life).
Jeevan Tarun will pay up if the most unfortunate were to happen to your kid. What parent will buy such a plan? Such plans do not serve any purpose.
In my opinion, the concept of purchasing life insurance on the life of a child is flawed.
Forget about the poor returns, this alone is a good enough reason to avoid this plan.
LIC Jeevan Tarun simply does not make sense.
By the way, by having life cover on the life of the child ( instead of the parent), the returns from the plans may be slightly higher as compared to other traditional plans. This is because the impact of the mortality charges will be lower.
Issue #2: You get guaranteed poor returns with LIC Jeevan Tarun
This is best explained with the help of an example.
I pick up Option 4, where 15% of Sum Assured is paid from 20th till 24th year (age) and 25% of the Sum Assured is paid at Maturity (25 years). The age of the child is 4.
You can see the returns range from 6-7% p.a. Of course, the result may change for different assumed values of Simple Reversionary Bonus and Final Additional Bonus.
Such a low return of 6-7% over the long term does not look attractive.
How does it fare?
PPF gives 7.9% p.a. at present. Had you invested the premium amount for your child’s education in PPF, you would have ended up with a much higher amount.
I ignore the life insurance part because the life cover is on the life of the child (and not your life). Therefore, life cover simply does not serve any purpose. After all, you had purchased Jeevan Tarun to provide for your kid’s education and marriage.
PersonalFinancePlan Take
LIC New Money Back plan-25 years was a poor plan. However, LIC Jeevan Tarun borders on stupidity. Such plans simply do not make sense.
If you are planning for your children’s education and marriage, you must always purchase life insurance on your life (and not your children’s life). This will ensure that your children’s future is taken care of even if you were not around.
This is where LIC Jeevan Tarun fails completely. Purchasing life cover on the life of your children does not serve any purpose.
We have already seen that the returns are likely to be quite low.
Hence, Jeevan Tarun provides meaningless life cover (for your children) and is simply not a good investment product.
There is no reason why you should think about purchasing LIC Jeevan Tarun. Strictly avoided.
Child insurance plans make for an excellent sales pitch. No parent wants to make compromises when it comes to child education. And guilt can easily take over if you say No to such a plan. Do not fall for emotional sales pitches. There is no need to feel guilty turning away an intermediary (who is trying to sell you LIC Jeevan Tarun).
Purchase a pure term plan. If you do not trust private insurers, purchase e-term plan from LIC. And invest the surplus in other long term investment products such as mutual funds, PPF, Sukanya Samriddhi Scheme, etc.
Note: LIC is not the only insurance company which offers such products. Many private insurers offer such products too. I chose to review LIC Jeevan Tarun because it is a very popular plan.
77 thoughts on “No parent should purchase LIC Jeevan Tarun”
So where do u think we can invest?
If you are planning for kids, go for an equity heavy portfolio.
Equity funds can be a good option. You can add PPF too if you wish.
Hello sir am totally confused, you please suggest which is the better thing to invest for my baby boy?
Hi Kranthi,
Please consider PPF for your kid and a term plan for yourself.
If you can take some risk, consider some exposure to equity funds.
Talk to an advisor/ He/she will guide you.
What about sukanya samridhi yojna in comparison to Jeevan tarun for my girl child.
Sukanya Samridhi Yojana is much better.
but SSY doesn’t have insurance neither to proposer nor to child .
What about premium vavier benfit in jeevan tarun policy.my agent says no need to pay the remaining premiums if any risk happen to parent
If parent’s life needs to be covered, then parent must purchase life cover for self (not on child’s life).
Which is the best policy to invest in saving for children educarion and marrage
I tend not to mix insurance and investment.
If kids are young, do consider equity mutual funds.
I do not mean that bulk of your investment should go towards equity funds but make a start.
Have you ever read about why life insurance designed
sir i bought jeevan tarun one year ago . after reading this post , can i stop it, can i get my money back?
Surrender penalty will be high. You may not get anything back.
Hi i want to invest 24000 per year for my child so that after 18 year i can get at least 15 lacks my child is 20 days old. My age is 32 years which plan and company should i go for.
Purchase a term life cover of yourself. And invest the remaining amount in an equity fund.
I want to invest 20K per month for the future purpose. I am 29 year and my son is 3 year old. Please suggest me where I invest.
I assume you plan to invest for your son’s education (undre-grad or post-grad). The goal is many years away.
Suggest you consider taking at least some exposure to equity mutual funds.
Sir, I want to purchase a policy for my child. I can invest ₹30000 per year. Want to 18 year term policy. Please suggest me.
I want invest rs 100000 pa but What is guarantee about equity mutual fund?
There is no guarantee of good returns in equity mutual funds.
You can even suffer a capital loss.
Sir, LIC agent says, bonus in this plan is guaranteed and not subject to change.Is that a bluff? Also premium waiver rider seems to be 5 times lower than what I would pay for a term plan covering same amount.Is that correct? I am good with 6-7% guaranteed returns but need to be sure that is a a guarantee. Can you clarify?
There is no guarantee of returns.
Deepesh,
First things first, the proposer is the parent either father or mother as in this policy the premium is paid by the parent the risk covered is on the parents and not on the child. So the sentence “Issue #1: Life Insurance is on the life of your child” is in itself is incorrect. The Life Insurance is on the proposer till the Premium paying term not the child. I hope Deepesh you can now relate it in much better way and correct the details on the page.
Should I invest in SBI SIP??
Hi Mrinmoy,
Please talk to a financial planner or a SEBI RIA.
He/she will guide you based on your requirements.
sheetal.das01@gmail.com
Want to terminate lic jeevan tarun option 1.I have completed 2 years.i just paid 3 rd instlament of 28000 a few days back..had taken policy when my daughter was 4.Pls suggest me best way to terminate it…paid up or what
Hi Sir,
I am 39 YO, please suggest me which LIC policy will help me and my family. I heard Jevan Lakshya is good. Please guide me.
Regards
Ravi
Hi Ravi,
I can’t comment on LIC Jeevan Lakshya.
In general, I do not like traditional life insurance plans.
Hi Deepesh,
I have invested in PPF & LIC money back policy for saving scheme. Now i want to save something for my daughter. Please suggest.
Thanks
Sushant Tyagi
Hi Sushant,
That is a complex question.
Do explore equity mutual funds if your daughter is quite young.
Dear Deepesh,
Hi thanks for such valuable advice! You shown me to think before investing our hard value Money into traditional Lic or other Policy.
Please guide transparently, how to invest 2,50,000 Rs per year, pl.explain break up and ofcourse your core advice also,
-currently, I am investing 1,50,000 in PPF acct of my child -Per year as per my adjustment of 4 to 5 installment by saving from salary (son age is 2yrs as on date) further,
-1000 in small cap mutual fund (DSP black rock)+ 1000 in large cap mutual fund(Birla sun Life) every Month is OK or not? If any pl.
suggest
-apart from above mentioned investment 01 Lakh I would like invest properly , where to invest?how to invest?Also security matters?tell company name and product name also. I expecting direct answer not logical this is my request.
Hi Somnath,
You are welcome.
I can only offer a logical answer.
So, the Rs 2.5 lacs that you are talking about, does it include Rs Rs 1.5 lacs in your kid’s PPF account?
Yes Deepesh sir,my kids PPF 1.5lakh included in total AMT 2.5 lakh for a year , so balance is (2.5-1.5= 1) 1 lakh that I would like to invest properly for high returns n security is must.
02 mutual fund also I mentioned earlier info, 1000 each deduction from monthly salary(both mutual fund started in 1st Oct. 2016) which is apart from 2.5lakh….pl guide
Hi Somnath,
Risk and reward go hand in hand.
So, if you want good returns, you have to be prepared for risk too.
If you are investing for long term, you can increase exposure to equity.
I further assume that you have already saved to provide for emergencies.
In my opinion, you can reduce PPF exposure to Rs 1 lac per annum.
For equity, you can invest through SIP in a good balanced fund. Please understand equity is suited for only long term goals nad is inherently volatile.
You need to learn to live with volatility.
Sir
What is fab in lic jeevan tarun
Is fab fixed in lic jeevan tarun or it varies
FAB is technically never fixed.
Hi… I am really very confused… Me and my husband have total 3 LIC saral policies taken few yrs back. My son is 1.5 yes now. Our agent suggested LIC Tarun with sa 1250000/- yearly premium will be approx 63k with premium waiver benefit. Pls suggest on this.
Hi Amraja,
This post is amount why you should not invest in Jeevan Tarun. Not much that I can add.
Suggest you contact a good SEBI RIA or a fee-only financial planner to pick up the right investment products.
Btw, I hope you have adequate life insurance coverage.
Dear sir..
I puchase sukanya smridhhi Ac(15000 pa) for my girl child (4yr) and
i want to purchase one more policy of LIC ( Jeewan Tarun 30000 pa)
Is it more beneficial than SSA or I should deposit the total amount in SSA ??
Please suggest..
Dear Sunil,
You should avoid LIC Jeevan Tarun (irrespective of whether you invest in SSY).
If you want to purchase life insurance, purchase life cover over your life.
Hi Sir ,
I took Jeevan Tarun 6 months ago at a premium amount of 1 lkhs PA ..My friend is an LIC agent and he advised me to do so .By reviewing this forum , i was really disappointed about the plan which i have choosed . I was trusted my friend and paid the amount . Please let me know if i have any alternate way to discontinue this plan or can i move on to other plans. I am an IT employee and its been 5 years i have been paying 25000 amount for SBI life with 10 yrs teniunity…
Hi Sandeep,
Please seek proper professional advice.
Cost of such advice is much lower than the cost of such mistakes.
The only way to discontinue is to surrender it. Not sure if you are ready for that.
Deepesh,
First things first, the proposer is the parent either father or mother as in this policy the premium is paid by the parent the risk covered is on the parents and not on the child. So the sentence “Issue #1: Life Insurance is on the life of your child” is in itself is incorrect. The Life Insurance is on the proposer till the Premium paying term not the child. I hope Deepesh you can now relate it in much better way and correct the details on the page.
Dear Sir,
For that you have to purchase an additional rider. This will entail cost.
It is not part of the base plan.
Whats wrong in that policy deepesh dont misguide people by un necessary post
Its purely protection plan for child and premium waiver is there if anything ununsual happens to proposer.
Most of us think for better education and marriage of our child and u urself agreed that no guarantee on mutual fund.Lic is giving atleast guarantee from day one we make a policy.
Hi Hemant,
Thanks for your inputs.
We can always have a difference of opinion.
Dear Deepesh,
Thanks for very informative article. Actually, I was planning to opt for Jeevan Tarun policy for my daughters aged 8 & 11. After going through the article, I have decided to re-look into the same. I have already got enough life cover and I do not want to invest any more on term plan. If at all, I decides to invest a portion of my income in LIC investment plans, after investing in PPF/SSN/MF, which policy I should go? Your advice will help me in selecting an appropriate policy.. Thanks in advance.
Dear Mr. Aithal,
You are welcome. Will really appreciate if you could share the post with your friends too.
If you don’t have adequate term life cover, you can go for LIC e-Term plan.
If you already have (as you have already mentioned), pick up the one that gives you comfort. I don’t have any preferences.
Suggest you go through this post too before you pick up any plan.
https://www.personalfinanceplan.in/insurance/traditional-life-insurance-plans-ulips-age-affects-returns/
Dear Mr. Deepesh,
Thanks for your advice.
Dear Deepesh I think you are misguiding in case of Jeevan utkarsh policy. You are totally wrong in your assumption . As per the long term plan for children this is the best plan with low premium. For sum assured of 2 lakhs. We are just paying 1.6 to 1.8 lakhs for which returns are high. No other mutual funds etc don’t give assurance and always in loss. Don’t blame market because of your office pressure.
Dear Bala,
Are you talking about LIC Jeevan Utkarsh or LIC Jeevan Tarun?
I use numbers and logic to explain my argument.
If you are not convinced, go ahead and purchase the plan. We can always agree to disagree.
I hope you do not have any vested interest in this comment.
Explained very neatly sir, thanks for the taking lot of efforts do so, but my question is I never heard anybody saying received a less maturity than expected.
one thing i observed in your review is you are telling everyone to avoid Jeevan Tarun policy instead you are failed to suggest the best plan for the Child.
whatever parameter ( Equity , Mutual Funds, ) you commented those are also on high risk and non guaranteed. and about PPF is it Guaranteed ? No. Next year what interest rates fall . not only you, in fact no one knows.
then why simply doing intentional review on some product where all your suggestion filled with pot holes then why r u finding loop holes in others. Obviously somehow LIC holds the brand of Trust. what else we need.
Thanks Mallesh!!!
Appreciate your time and feedback.
Yes, Even Sukanya Samriddi Yojana also risk is their, why because when the scheme launched interest was 13% but what about now ? Its Just 8% , who knows what is the interest rates for another 15 Years.
So
I recommend LIC is the best plan for your child.
Hi Grace,
Thanks for your time and inputs.
Btw, SSY started with 9.3% p.a. (and not 13%)
Hello sir, Nice Presentation about Jeevan Tarun ( why we shouldn’t buy)
I agree with your one point
1) Insurance Coverage should be who paying the premium but here its in the name of Child
except these nothing new because all investment have its own Pros and Cons,
but when come to LIC, at least you can take Premium waver benefit ( In case of uncertain things happen complete premium will be waived off)
Its a very beautiful feature of this plan, so complete child future secured, is their that much security in Equity ? Mutual Funds ? Sukanya S Y ? PPF?
NO NO NO NO
Thanks Taposi for your inputs and feedback!!!
compare to ssy, jeevan tarun policy is very good return…..
Thanks for your inputs.
Hi Deepesh, after reading your comments on lic Jeevan Tarun, I felt like I have to cancel/stop the Jeevan Tarun policy. But I have already paid 2 premiums(43K+43K). It’s just 2 years old policy. Coild you please suggest me cancellation of this policy is good idea at this time.also this is the only investments I did it for my daughter.
Hi Sundar,
We shouldn’t only look at mathematics to resolve such dilemmas.
You also need to see what prompted you to invest in this plan in the first place.
Mathematically, surrender it a good answer.
However, if this investment is only a small portion of your overall investments and the premium does not crowd out your other investments, you can continue this plan.
Refrain from investing in such plans in the future.
Which Lic plan should I buy for 5yrs child
Hi Vikas,
I am not very fond of traditional plans.
In any case, it may not be very smart to purchase life cover of the life of the child.
Better to have adequate coverage for you.
You can invest in PPF, mutual funds etc for investment.
While overall views are in line, I feel you are undermining some key aspects sir. The simple reversionary bonus is easily 45 plus per thousand of SA for the 25 year policy and also FAB is not as uncertain as you make it sound, FAB has been regularly declared by Lic for all participating policies. While aspects have been explained well, I believe you have been over critical. I have taken the policy for my 2 year old and will continue for the full term with nothing to lose and the safety from regular LIC declarations of bonus and fab.
Hi Prashaanth,
Thanks for your inputs.
It is not always easy to avoid biases while writing. 🙂
We can always have a difference of opinion.
Bonuses are not guaranteed. It is possible I may have taken a more conservative value.
You can pick up different values and see the impact on the final returns.
So long as you understand the calculations (and it seems you do) and are making an informed decision, it is quite fine.
And this is true for any investment and not just LIC policies.
You know what you are getting into and the potential causes of disappointment. It is easier to live with such decisions.
Just that, in my opinion, it is not a good idea to purchase a plan where life insurance is on the life of the child. Anything that goes towards purchasing life cover for the child is like money going down the drain. I would want to avoid such an expense.
And yes, please ensure that you have adequate life cover.
The policy clearly says:
In case of the death of the premium payer, it will continue to cover the policy and NO more premiums are needed to pay.
Dear Deepak,
For that to happen, you have to purchase an additional rider (Premium Waiver Benefit Rider). It is not part of the base plan.
Dear Sir,
I have brought this policy 3 months ago, should I stop paying the premium amount as I have opted for SI of Rs 10,00,000 and the premium amount per month is around 2900. My daughter’s age is only 9 months and already huge portion of my saving is invested in SIPs and in NPS where should I invest, please suggest..
Hi Akshay,
If I were you, I would let go.
I assume you have adequate term life cover.
Dear Sir,
regarding jeeven tarun……
How can we convert life cover of child (as per you) to life cover of parent-( premium payer)
Whats additional rider need to take.(PWB)
Hello sir please suggest me for sbi life smart champ plan & LIC JIVAN TRUN PLAN i both plan are start from 29 Sept & 15 Oct with amount
1.lack and 0.5 lack respectively
I am your big fan..my email is consist of maximum messages from your newsletter post. I often go through your column. I am a simple teacher but lots of dream and financial goal. Hope you will guide me. Plz guide me to invest for my baby girl of 1 month mentioning name of plans as I don’t have that money to afford myself a financial adviser. But I am your real fan. I can give you screenshot of msgs from you,saved in inbox. Plz give some ideas on which equity fund to invest, SSY etc. Can I contact you in direct email.. as you rarely reply in comments
Thanks Neelam for such kind words.
Congrats on becoming a mother.
I do not much about your risk profile. However, you can start with 50:50 equity: debt allocation.
For debt portion, you can invest in PPF or SSY. You can open both if you wish.
For equity portion, you can pick up a low-cost hybrid fund (Aggressive hybrid). You can find that from Value Research.
You should do well.
One more thing, make sure that you have adequate life coverage.
My best to you and your family!!!
I want to invest 50k per year on son name.
Pls suggest some plan like LIC/PPF/FD/MUTUAL FUND etc etc..
Pls suggest ASAP. Thanks in advance.
Age54yrs.
Is it advicable to purchase term insurance? .
I am 48 years . my son is 12 years . want to go for jeevan labh for my son for sum assured 5 lakhs. pls suggest . or suggest anything better for self and my son