LIC's Jeevan Saral: High on Features low on Returns

Posted by Admin on 1

Many readers requested me for the review on LIC’s Jeevan Saral.

I checked Web for the resource on Jeevan Saral and found there are plenty of web pages dedicated to this policy.

So let me put only the important feature of this policy and my views on it.

Jeevan Saral is an Endowment plan with a difference. It comes with many good features like No surrender charge, Partial withdrawal facility like ULIP, premium selection by policy holder etc.

1) You select the premium.

Normally we first decides on the Sum assured and based on this we come to know net premium amount but in Jeevan Saral you select the premium first based on this maturity sum assured gets determined.

You can select monthly premium as low as Rs. 250.

2) High risk cover.

Normal endowment policy only pays Sum assured + bonus, but here once you decide on the monthly premium an amount equal to 250 times monthly premium(called as Death benefit S.A) + premium paid (excluding first year and rider premiums) + loyalty addition is paid.

This makes continues increase in the risk cover as the term progresses.

For eg. On Monthly premium of Rs. 250/- Death benefit SA is 250 * 250 = 62,500 + Total Premium paid as mentioned above + LA.

On maturity you will get Maturity Sum Assured + Loyalty Additions.

Loyalty addition will be declared by LIC from 10th year onwards.

3) Flexible surrender terms

  • < style=""> 80% of the maturity S.A.
  • more than 4 but less than 5 years premiums paid : 90% of maturity S.A.
  • 5 year + : 100% of maturity S.A.

Now this is the place where agent misleads the clients.

Although 100% MSA is payable after 5 years but actually you end up loosing your money if you withdraw money in the initial year. Here is the example.

Age: 35 years. Term: 25 years.

Premium: Rs. 4704/- Per Annum.

Year

Total Premium paid

MSA

LA

Profit(Loss)

5

23520

18660

0

(4860)

6

28224

23180

0

(5044)

9

42336

37892

0

(4444)

10

47040

43360

18000

14320

So at no point of time you get your money back if you surrender before 10th year (or partially withdraw the money).

LA figure is not guaranteed and it would be based on profit of LIC.

4) Partial Withdrawal.

This is one of the good parts of Jeevan Saral.

In the initial year you can set a high annual premium and at the later stage you can reduce the premium by withdrawing a portion of policy.

A portion of the policy can be surrendered and money can be received from LIC, if premiums, have been paid for a minimum of 3 years, subject to the following conditions:

  • The basic annual premium and all other benefits will be reduced to the extent of partial surrender.
  • Any no. of times, partial surrender is allowed.
  • There should be a gap of minimum of one year between two successive partial surrenders.
  • Minimum annual premium that can be surrender at a time is Rs.1,200/- p.a. and should be in multiples of Rs.600/- p.a. thereafter.
  • The reduced basic annual premium after surrender shouldn’t be less than Rs.3,000/- p.a. for age upto 49 years and Rs.4,800/- p.a. for age 50 and above.
  • The accident benefit, term rider benefit and additional premium payable will also be reduced proportionately.

For eg. If your current Annual premium is Rs. 12,000 and you want to reduce it to Rs. 6000 by partial withdrawal after 8 years.

An amount equal to MSA for a annual premium of Rs. 6000 is paid to you.

In my view Policy is good for those who want risk cover with low premium and flexibility to reduce premium at the later stage. However on the return front policy doesn’t looks good. LA is not guaranteed and it is paid only after 10th policy year. Early Surrender and partial withdrawal features are misleading.

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1 comments:

Rajat Chadha said...

In my opinion, this policy is good for old people. If you are 30 yrs old, then you can get same insurance cover with lower premium in the traditional (table 14) endowment plan by LIC. Moreover, if you plan to take a policy of >15 yrs plan 14 would probably be better in terms of return. I agree that Jeevan Saral offers good flexibility, but it is good for old people for whom traditional plan is more expensive.

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