Jeevan Anand policy from LIC of India is a combination of Endowment and Whole Life policies. Which details you can overlook while buying Jeevan Anand? We have tried to review the product with an example.
Jeevan Anand provides protection against death throughout the lifetime of the life assured with the provision of payment of a lump sum at the end of the selected term in case of survival.
Jeevan Anand Policy– How the plan works
In Jeevan Anand, Sum Insured along with Bonus will be payable to the party at the end of the selected term. But the insurance cover will continue after this payment also, till the lifetime of the party and Sum Insured will be payable to the nominee on the death of the party.
Jeevan Anand Policy– Example
- Mr. X who is taking this policy on 15th April, 2011
- Age at the time of taking the policy: 30 years
- Sum Insured – Rs. 10 Lakhs
- Policy Term – 25 years; Premium Paying Term – 25 years
- Yearly Premium – Rs. 41,206/-
- Date of Maturity – 15th April, 2036
- Amount payable on 15.04.2036 – Sum Assured of Rs. 10 Lakhs + Bonus for 25 Years
How much will be payable on 15th April, 2036?
The amount payable at the end of the selected term will be the total of Sum Insured and the Bonus declared by LIC. The bonus declared for 2008-2009 is Rs. 45/- per thousand Sum Insured (as per LIC website). This will be Rs. 45,000/- for Rs. 10 Lakhs policy, which will be payable in 2036. This bonus will depend on the experience of LIC and is not assured. If we assume this rate to continue for the next 25 years, the amount payable as bonus in this policy will be Rs. 11.25 Lakhs (Rs. 45,000×25 years= Rs. 11.25 Lakhs). So the party will get around Rs. 21.25 Lakhs.
(Sum Insured Rs. 10 Lakhs + Bonus 11.25 Lakhs) in 2036.
What happens after 2036?
The last premium for the policy would have been paid in 2035 and he received the abovementioned amount in 2036. Now the risk cover will continue to be available in the policy without paying any further premium. This cover of Rs. 10 Lakhs will continue till his lifetime and on his death, the amount of Rs. 10 Lakhs will be paid to the nominee.
So this policy is a combination of an Endowment and Whole Life Policy.
What happens in case of death before 2036?
In this case, the nominee will get the Sum Insured (Rs. 10 Lakhs) and the Bonus till date of death and the policy closes. No further payments will happen later on.
This plan is a modified version of the most popular Endowment Plan of LIC. The premium for Mr. X in Endowment Policy comes to Rs. 37,819/- less by Rs. 3,387/- compared to Jeevan Anand. But the extra death cover till lifetime, makes it attractive compared to Endowment Policy.
Who should buy Jeevan Anand policy from LIC?
We have calculated the current Bonus rates for the next 25 years for our example. Bonus rates are on the decreasing trend and are likely to continue to do so in future. Even with the current bonus rates, the Internal Rate of Return for Jeevan Anand will be around 5%, without considering the life cover after the maturity date. If you are a very conservative investor, and if you are happy with this very conservative return, you can go for this policy. But there is no need for an insurance cover after your retirement, if nobody is financially dependent on you. Otherwise, a combination of Mutual Fund plus Term Insurance will be a better option for you.
What do you think? Is it worth buying “Jeevan Anand Policy from LIC” or Term Insurance and Mutual Funds are better options.