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Stay away from LIC Jeevan Utkarsh

LIC Jeevan Utkarsh review disability insurance

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LIC has come out with a new packaging. The reason I say this is that the product is not too different from older ones but comes with a new name.

The plan was launched early September 2017 and will be available for 270 days from the date of launch. Why? I have no clue.  In my opinion, it is a marketing gimmick. Scarcity may shore up demand.

As I have mentioned before, I have nothing against LIC and everything against traditional life insurance plans. All the private life insurance companies come out with traditional life insurance plans. I don’t like those plans either.

LIC Jeevan Utkarsh is a non-linked participating, single premium life insurance plan.

LIC Jeevan Utkarsh: Salient Features

  1. Minimum Entry Age: 6 years
  2. Maximum Entry Age: 47 years
  3. Minimum Basic Sum Assured: Rs 75,000
  4. Maximum Basic Sum Assured: No limit
  5. Policy Term: 12 years
  6. Premium Payment Mode: Single Premium (We will see why this is a problem)
  7. Loan Available after 3 months

Please visit LIC website for more details about the plan.

Here is what you must know.

Maturity Proceeds from LIC Jeevan Utkarsh will NOT be taxable

You will most likely not be told this at the time of sale.

Since LIC Jeevan Utkarsh is a single premium plan, the premium will most likely be more than 10% of Sum Assured. And when the premium is more than 10% of Sum Assured, the maturity proceeds are taxable.

Under single premium plans, you have to pay the premium just once (and not annually). Therefore, it is quite likely that premium will most likely be more than 10% of Sum Assured (death benefit). And when the premium is more than 10% of Sum Assured, the maturity proceeds are taxable.

Something similar would have happened in case of Jeevan Utkarsh too. However, LIC smartly circumvented the issue by specifying the Death benefit as atleast 10 times tabular single premiumI had completely skipped this aspect until a reader (Ravi) pointed out in one of the comments.

For instance, as per LIC website, the single premium for a 30 year old for Rs 10 lac Sum Assured will be ~ Rs 5.6 lacs. Clearly, the premium is more than 10% of Sum Assured. However, since the death benefit will be 10 times single premium i.e. Rs 56 lacs, the proceeds will not be taxable.

A point to note is that the death benefit is 10% of tabular single premium. In case, after underwriting, your premium is increased due to any existing medical condition, your maturity proceeds may not be exempt from tax.

Please understand payout from the plan in the event of death of the subscriber will still be exempt from tax.

Read: The Problem with Single Premium Life Insurance Plans

Read: Benefits from LIC Bima Bachat Plan are taxable

Point to Note: In case of Single premium plans, there is a question mark over how exactly the maturity proceeds will be taxed (at least I am not sure), if those are taxed.  Some argue that the entire maturity proceeds will be taxable while others say that the premium paid shall be deducted from the maturity amount before taxes apply. Perhaps, a good CA will guide you better.

By the way, taxation of maturity proceeds is a common problem for single premium plans. Another single premium plan from LIC, LIC Bima Bachat plan, has a similar problem. Good that LIC has avoided the issue in this plan.

However, do note nothing comes for free. Better death benefit is likely to show up in even poorer returns.

What I am sure about is that the maturity proceeds are taxable.

This is a good enough reason to stay away from LIC Jeevan Utkarsh.

What will be the returns like?

LIC Jeevan Utkarsh is a participating plan. Therefore, the returns will depend on the loyalty additions announced by the company at the time of exit (death, maturity or surrender) from the plan. Therefore, it is difficult to put a number to it. More so, because the return depends on one-time announcement (unlike reversionary bonus that is announced every year).

However, don’t expect returns to be higher than 4-6% p.a. Quite bad for the long term.

Remember this is pre-tax. Since the maturity proceeds are likely to be taxable, the post-tax returns will be even lower.

Low life cover and abysmal returns, I cannot see any reason why you should go for LIC Jeevan Utkarsh.

For the sake of completion, let’s consider a few other aspects about LIC Jeevan Utkarsh.

Death Benefit

After the date of commencement of risk, in the event of demise of the policy holder, the nominee will get

Sum Assured on Death + Loyalty Additions, if any.

Where Sum Assured on Death is the highest of,

  1. 125% of the Single Premium
  2. Basic Sum Assured
  3. 10 times Tabular Single Premium (will exclude any loading after underwriting). This is what made the maturity proceeds exempt from tax.

Loyalty Additions shall be applicable only if you have completed 5 years in the policy. Therefore, no loyalty addition to be paid if the demise happens before 5 years.

To give an idea of the level of premium, I copy this table from LIC website

For instance, if you are 40 years old, you will pay a premium of Rs 6.57 lacs for a Sum Assured of Rs 10 lacs (death benefit will be Rs 65.7 lacs).  There will be GST @1.8% applicable too. There is rebate available too for higher Sum Assured but the premium will still be about Rs 6.45 lacs (after GST)

Read: How GST affects your Insurance Premium?

Maturity Benefit

At plan maturity i.e. after 12 years, you will get Sum Assured along with Loyalty Addition.

Settlement Option

You can choose to receive the death benefit (for nominee) or maturity benefit in installments instead of lump sum. The installments can be spread out over 5, 10 or 15 years.  The rate of interest to arrive at installment size shall be decided by the insurance company.

If the rate of interest is 8% p.a. and your maturity amount is Rs 10 lacs and if you installment period of 10 years, you will get ~ 12,000per month for 10 years. The installment amount will be lower if the interest rate is low.

Again, makes little sense. Remember these installments will be taxed too.

This is the first time I am seeing such an option in an LIC plan. However, it does not add much value. Only adds uncertainty about interest rate.

PersonalFinancePlan Take

Stay away from LIC Jeevan Utkarsh.

As with any other traditional life insurance plan, it comes with low life cover, poor returns and high surrender costs. In addition, the maturity proceeds are taxable in this plan.

I see no reason why you should invest in such a plan.

You will be much better off purchasing a term life insurance plan and investing the proceeds in a pure investment product.

Additional Links

  1. LIC New Jeevan Anand
  2. LIC New Money Back Plan-25 years
  3. LIC Children’s Money Back Plan
  4. LIC Jeevan Tarun
  5. LIC New Endowment Plan
  6. LIC Jeevan Labh
  7. LIC Bima Bachat
  8. LIC Jeevan Umang
  9. Problems with Endowment Plans

Image Credit: Pixabay

15 thoughts on “Stay away from LIC Jeevan Utkarsh”

  1. Pls do not mislead the customers.

    SA is 10 times (only maturity proceeds are different than SA)
    It also says 10(10D) benefit

    Go to LIC21 website & feed your datas. You will get clear picture

    1. You are right, Ravi.
      I erred on this front. Thanks for pointing out.
      Will make the necessary changes.
      Sum Assured has been kept 10 times tabular premium to keep the benefit under Section 10(10D) intact.
      Still, my opinion of the product does not change much. It still remains
      A point to note, in case there is loading due to any illness, benefit under Section 10(10) will go away.

      1. Does 10(10D) exemption applies if the insured is less than 8 years old ? The commencement of Risk is only when the insured is 8 years old. That means for a 6 / 7 years old, first two years or first year the sum assured value is ONLY equal to the single premium paid which is against the clause of 10(10D) exemption :
        actual sum assured simply means the sum assured which is least in “ALL” the policy years

        Can you please clarify ?

        1. Hi Babu,
          Great question.
          I agree this aspect can be a bit of a problem if the age of the applicant is less than 8 years. You are right it has to be for all the policy years.
          However, I do see scope for subjectivity over here.
          In any case, it is a bad idea to purchase life cover for a 8 year old.

  2. Sir, I m vaibav , 36, want to Buy ‘Health insurance’ from Govt, company……… like Oriental insurance …..etc…. should I opt for TPA services or Not?……..which option is hassle free?……..TPA or direct approach for claim?

  3. . very good plan launched by LIC in these times. For the conservative client, it is a must have . I appreciate LIC for bringing out this product. And Readers do not be surprised if you read articles like “STAY AWAY FROM UTKARSH’ because when in need you can get a loan or surrender from any insurance product but THESE people who advise others to STAY away will not even give you a penny. Their sole motto is to BRING DOWN giants like LIC. When have they talked good about LIC Ever since Fin writers took to Blogdom, they have been demeaning LIC products in every possible way. State Bank Of India has collected Rs 235.06 crores as penalty from 388.74 lakh accounts for not maintaining the minimum balance in last 3 months and all these money were collected from poor people who could not maintain the minimum balance.. Guys…stay tunes

    1. Hi Mazibar,
      We can always have a difference of opinion.
      A bad product is a bad product. And LIC Jeevan Utkarsh is quite likely to be one. A good review or a bad review does not change this.
      As mentioned many times earlier, have no issues with LIC. My issue is with traditional plans. Such plans from private players must be avoided too.
      Btw, I have written many times against banks too.

  4. Return OF Investment is much more important than Return ON Investment. LIC of India has proved its mite in last half century. So half baked views without any taking all factors into consideration makes you a poor adviser. While this discussion is being done LIC is garnering hundreds of crores surpassing all MNCs. It is rightly said “Haathi nikle bazaar, kutte bhonke hazaar”.

    1. Hi Nirav,
      The world will be a better place if we are tolerant of each other’s view.
      We can always agree to disagree.
      Thanks for your inputs.

  5. Hi Deepesh,

    Sorry if you feel I went overboard to the point of being rude.

    Please compare apple to apple. Traditional Plan Insurance is NOT an Investment but has an element of risk coverage along with Savings. With more than 60% Rural population and high Financial illiteracy even in Urban area, LIC’s Traditional Plan can prove to be double edged sword for Life Events as well as untimely death of bread winner. With door step services from its strong and committed force of 15 lac Agents, LIC ensures that the Premiums are paid regularly thereby ensuring compulsory savings .

    1. Hi Nirav,
      That’s completely fine.
      Contrary to the perception of many readers, I like LIC a lot. In fact, I have advised many of my clients to purchase e-term plan from LIC.
      The trust that LIC enjoys has no parallel and there are good reasons for the same.
      The problem is with traditional plans. And LIC is not the only company that comes out with such plans. All private insurance companies such as ICICI Prudential and HDFC Life have similar plans too and those are equally bad.
      I pick up such plans from LIC for review because it is easier to convey my message against traditional plans.
      No point writing about ICICI Prudential plan when nobody would search and want to read about.
      I get your point. My limited argument is that there are other ways too to encourage disciplined regular savings.

  6. For one reason you hold grudge for Traditional Plans is that hey give (apparent) poor returns. To take forward this dialogue to logical conclusion may i request you to enlist ALL your dislikes for Traditional Plans. I would be glad to learn your point of view. We can weigh pros and cons, or agree to disagree.

    1. Hi Nirav,
      1. The life cover that you buy is slave to how much premium you can pay. That is my biggest issue with traditional plans and ULIPs.
      2. Returns are very poor. Very easy to beat these returns with a mix of term plan and PPF.
      3. There is little flexibility. Exit is very expensive.
      4. Plans are like black-box. It is a lesser concern though.
      5. Front loading of commissions makes it prone to mis-selling.

  7. okay..i just have one question.
    how does jeevan utkarsh have a bad life cover? 10 times is quite a hefty amount and will be helpful to the family of the deceased. and also on top of that, maturity return looks okay as well..
    but more importantly.. do other plans have better life covers? if yes, then please mention them.

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