LIC Jeevan Labh (Plan 836) is a limited premium, non-linked participating endowment plan. Traditional life insurance plans are poor products and I do not expect LIC Jeevan Labh to be any different.
It is a new plan, at least on paper. In reality, it is old wine in a new bottle. Let’s find out more about this plan in this post and see if makes sense to invest in such a plan.
LIC Jeevan Labh Review
- Limited premium payment plan i.e. premium payment term is less than policy term
- Premium Payment Terms of 10/15/16 years for policy terms of 16/21/25 years
- Minimum Entry Age: 8 years
- Maximum Entry Age: 50/54/59 years for policy terms 25/21/16 years respectively
- Minimum Basic Sum Assured: Rs 2 lacs
- Maximum Basic Sum Assured: No upper limit
- You can purchase Accident Death and Disability Benefit rider along with the plan.
You can find out more about LIC Jeevan Lab plan on LIC website.
You can see there are only three possible combinations. If you pick up plan with premium payment term of 15 years, you will pay premium for 15 years while you will get life cover for 21 years. You will get the maturity amount at the end of 21 years (if you survive the policy term).
I do not see much difference between LIC Jeevan Labh and LIC New Endowment plan. The only difference I see is that LIC Jeevan Labh is limited premium payment plan. LIC New Endowment plan is a regular premium payment plan.
I see LIC Jeevan Labh as nothing but a marketing gimmick. With a new plan, the agents can weave a fresh story and make a good sales pitch.
Must Read: Problems with Endowment Plans
In the event of demise during the policy term, the nominee gets
Base Sum Assured + Vested Simple Reversionary Bonus (till date)+ Final Additional Bonus (if any)
Simple Reversionary Bonus is announced every year by LIC. It is announced as per thousand of Sum Assured. So, if the Sum Assured is Rs 10 lacs and the bonus is announced as Rs 40 per thousand of Sum Assured, your annual bonus is Rs 40,000.
The caveat is that you do not get the reversionary bonus the same year. The bonus merely gets added to maturity amount and is paid at the end of policy term. No compounding benefit. By the way, this makes for an excellent sales pitch. Many investors can’t appreciate (or rather overlook) the difference between receiving bonus now or 20 years later.
Final Additional Bonus is applicable only in the year of maturity/death. It is also expressed as per thousand of Sum Assured.
Maturity Benefit under LIC Jeevan Labh
Base Sum Assured + Vested Simple Reversionary Bonus + Final Additional Bonus (if any)
LIC Jeevan Labh vs LIC New Endowment Plan
The only difference I can see is that LIC New Endowment Plan is a regular premium payment plan (policy term = premium payment term). On the other hand, LIC Jeevan Labh is a limited premium payment plan ( policy term > premium payment term).
Same product. New packaging.
Let’s not blame LIC. Everyone does that.
Premium for a 35 year old with Sum Assured of Rs 10 lacs and a policy term of 25 years (premium payment term of 16 years) is Rs 44,952 (before service tax). After including service tax, premium in the first year will be Rs. 46,525 and Rs 45,738 in the subsequent years.
In case of LIC New Endowment Plan, the premium was Rs 39,191 in the first year and Rs 38,529 in the subsequent years. Under LIC New Endowment plan, you pay premium for the entire 25 years.
Therefore, in case of LIC Jeevan Labh, you pay a higher premium for lesser number of years.
Benefit Illustration: LIC Jeevan Labh
There is a minor problem. LIC Jeevan Labh is a new plan and there is no information about annual bonuses for me to make a reasonable assumption.
I checked bonus information for many other plans from LIC. A value of 50 per thousand of Sum Assured looks like an optimistic value for Simple Reversionary Bonus.
Final Additional Bonus, in any case, depends on your luck. I will consider various value of FAB to assess investment performance.
You can see there is nothing really to be excited about when it comes to returns (even with very optimistic values of bonuses).
It’s the same as with other traditional plans.
You could have done better with Term Plan and PPF
You could have done much better with a combination of term plan and Public Provident Fund (PPF). I am not even talking about equity mutual funds.
I have picked up LIC e-Term plan. Since the lowest life cover under the plan is Rs 25 lacs, I have considered Rs 25 lacs cover for LIC e-Term plan.
You can see combination of term plan and PPF beats LIC Jeevan Labh in every scenario (expect at maturity). However, you must see bonus assumptions are quite aggressive and you get a much higher cover during the entire term. Had you replaced PPF with equity funds, you could have ended up with a much higher maturity corpus.
Since LIC Jeevan Labh premium payment term is only 16 years, how do you account for term insurance premium in the years 17 till 25th. I have withdrawn term insurance premium from accumulated PPF corpus. Yes, you can withdraw from PPF after initial maturity of 15 years.
I do see any other reason but the trust in LIC and some glib salesmanship behind purchase of such plans.
Traditional life insurance plan must be avoided. Traditional plans provide low life cover and poor investment returns.
You can easily replicate (and outperform) performance of traditional plans using a combination of term life plans and PPF (or mutual funds). Keep insurance and investment needs separate.
There is no LABH in LIC Jeevan Labh. Stay away.