LIC's Jeevan Astha: A guranteed return plan

Posted by Admin on 20

LIC (Life Insurance Corporation of India) has launched new plan “Jeevan Astha” an endowment plan with guaranteed addition on 08th December 2008.

The plan will be available only for maximum of 45 days and closes on 25th January 2008.

Features:

  • Minimum entry age 13 years.
  • Maximum entry age 60 years.
  • Only Single Premium payment mode is allowed.
  • Policy term of 5 and 10 years.
  • Minimum Single Premium is Rs. 25,000.
  • No Limit for maximum Premium.
  • Minimum Basic Sum Assured is Rs. 1,50,000
  • Only Single Premium payment mode is allowed.
  • Rebates for higher Sum Assured.
  • Tax benefit.

Maturity benefit would be Maturity Sum Assured along with guaranteed addition of 9% for 5 years term and 10% for 10 years term on Maturity Sum Assured along with the Loyalty addition.

Premium paid in this plan is eligible for tax deduction as well as maturity benefit is tax free.

For eg. For a person of age 35 years, if he chooses term of 10 years then his premium will be Rs. 48,975 for a basic sum assured of Rs. 3 Lac.

On maturity he will receive 1 Lac Rupees + loyalty addition.

Q) What is Maturity sum assured?

A) This is the amount that one will receive on maturity along with the guaranteed addition. Guaranteed addition gets calculated based on MSA.

For eg. If MSA is Rs. 50,000 then GA is 10% of Rs. 50,000 that is Rs. 5000.

Q) What is Basic Sum Assured?

A) Amount that is to be paid along with guaranteed addition on death. Premium is calculated based on maturity sum assured.

For e.g. If BSA is Rs. 3 Lac for a person of 35 years, then his single premium is Rs. 48,975 for a term of 10 years.

In this case his MSA is Rs. 50,000.

Death Benefit:

  • Basic Sum Assured along with guaranteed addition in first year.

  • After first year 1/3rd of Basic Sum Assured is paid along with the guaranteed addition.

  • In last year 1/3rd of Sum Assured along with guaranteed addition and loyalty addition.

Policy provides high risk cover only in the first year and thereafter it reduces to 1/3rd of the Basic Sum Assured.

  • Plan offer a great level of liquidity with guaranteed surrender value of 90% of premium paid after 1st year. (This excludes any extra premium amount).

Policy also has a provision of loan facility after completion of 1st year.

Main aim of this policy is to attract those people who want fixed return on their investment in addition to it policy also has a provision of loyalty addition and above all it provides insurance cover. This policy would serve as a better alternative for fixed deposit and NSC as policy comes with a minimum term of 5 years.

If you have decided to park your money in NSC or Tax saver FD this year for tax benefit then “Jeevan Astha” provides a nice opportunity at least for this year to get a better return.(Read how “Jeevan Astha” is better then NSC in Tax saver FD).

For others this policy provides risk free return along with insurance.

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20 comments:

Abhisek said...

I have recently heard a scheme LIC Jeevan Aastha,i want to ask if i invested in it then can i withdraw my money after 1 year?

Bhargav said...

Hi Abhishek,
Thanks for spending your valuable time on this blog !

Regarding your query..
Yes you can surrender(Withdraw) your money after 1 year itself.
In such cases you will receive 90% of your single premium paid.

Srinivas said...

Hi Bhargav,
Its great to see all your advices on Insurance policies.
I have a question on Jeevan Aastha.
There is a Same kind of Insurance policy from Religare Aegon Life Insurance.
Can you please tell me the advantages and disadvantages of these two policies and which gives more returns comparatively.Religare Aegon says it is providing the 62% guaranteed returns from that policy.

Please advice me

Srinivas

Bhargav said...

There are three way of selling any financial product.

1)Showing the normal return (which in case of AR is 7.2% and Jeevan Astha it is 9% and 10%).
2)some people calculate return as normal return + Tax you are saving.
for eg. if you are investing Rs. 10000 and rate of return is 10% then maturity value after 1 year is Rs. 11000. however as you have saved tax of Rupees 3000(consiering you in 30% bracket) your actual saving is 10000 + 3000 i,e 13000.
3)In RA case they are showing the return as TAX FREE return, this means there is no tax on maturity value you will recieve.
i,e for interest of Rs. 1000 earned by you if you pay tax of Rs. 300(30%) then actual return is much less.

If we compare RA and LIC policies both the policy have maturity benefit tax free.

And to answer your query I would say that in term of overall return LIC(which gives 10%) scores over RA(which gives only 7.2%) and here TAX FREE return turns out to be more then 62%

I will put a detail analysis of this policy soon on my blog as it seems that it has some nice features compared to Jeevan Astha.
Thanks for informaing me about this product.

priya said...

Hi Bhargav,
Thanx for info.
Are medical test required for Jivan Astha ?

Bhargav said...

Hi Priya,
As per info available with me there is no word on special medical test related to this plan.
I believe it follows the same medical rules, i,e normal medical test after 45 years depending upon Basic Sum Assured.
However I would recommend you to consult Insurance advisor.

Anonymous said...

Is it possible to withdraw GA at periodic intervals. Just the way bank can pay the quarterly interest or monthly interest.

Bhargav said...

No you can't.
either you surrender after 1 year or on maturity, only two way to come out.

Anonymous said...

Is it true that return on Jeevan Astha on matuarity is Tax Free? As per my view it is not, beacuse of 'Single Premium' policy.

can you please confirm this.

Thank you.

Anonymous said...

Is the Jeevan Astha is the best policy among the other Endowment policies, in terms of investment? and in terms of insurance?

Thank you.

Bhargav said...

Maturity amount is tax free.
In most of the single premium insurance plan maturity amount is always tax free and that is one of the driving feature which attracts many investor.

Bhargav said...

It is better then Endowment plan in term of investment/return as
1)better liquidity.
2)Good return.

In terms of Insurance cover it is not as only 1/3rd of insurance cover from 2nd year onwards.

but in my view JA can be compared with other tax saving instruments like
NSC,TAX Saver FD and insurance cover is just an add on..

Check my blog for its comparison with NSC and FD.

Anonymous said...

Thanx Bhargav

Nadeen said...

Hi Bhargav,

Thanks for your valuable input.

Keep up the good work and share your vast knowledge of Insurance relate topics.

Looking forward to see more blogs coming from you.

Thanks
Nadeem

Abhishek S said...

Hi Bhargav,
Going through your illustration for Jeevan Anand which says that for a premium of 21,616/- for 25 year yields near to a total amt. of 1300000/-.
My question is that on maturity of the policy - The insured person gets the total 13 Lakh amount as the insurance is continued till death OR a amount is paid after minus of Sum Assured.

If the person gets the total 13Lakh then this becomes one of the best plan for long term investment and insurance. Infact far more superior to Money back plans?

Please correct me if I am mistaken.

Thanks a lot

Abhishek S

Sanghamitra said...

Hi Bhargav,

The LIC policy Jeevan Aastha, provides us 9% interest, but in case of FD or NSC they provides compound interest, which is not the case here.

Secondly, can you tell me what is loyalty addition?, what is the rate of this benefit and whether it is guaranteed or variable?

Bhargav said...

@Sanghamitra,
You are right as 9% and 10 % return is on MSA.
but maturity benefit is tax free which is not in case of NSC,FD;where you end up paying tax on interest earned and hence your effective return is less.

Loyalty addition is a separate addition to your maturity amount, as per LIC's site it is 7.5% for 5 yr and 10% for 10 yr term(on MSA;however it is not fixed).

@Abhishek,
You are right.
On maturity you will get SA+BONUS+LA
and on death nominee will get SA in additon to what maturity amount paid on maturity

It is superior in term of return and insurance cover compared to MB, but JA is Endowment plan and hence it doesn't provide liquidity like MB.

Anonymous said...

Hi Bhargav,
I m sorry to post this question here (as I couldn't find the appropriate site to raise this query).

My question is...
I wanted to open a PPF account with either Post Office or with SBI. Can you please let me know which is, PO or SBI, safest place to open PPF a/c?

Thank you.

Bhargav said...

Both are equally safe as both has govt. backup.

I request all to put their name which makes easy for me to identify my reader
[Anyways I think I know you ;-)]

Pkumar said...

I think the rate of return is between 7-8 % and not 9 or 10 as indicated on guaranteed amount.

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