LIC Aadhaar Shila - Saviour of Women? A Comprehensive Review
Life Insurance Policy ensures a family’s financial stability in case of eventualities. Life Insurance is important for women for a variety of reasons, just as it is for men. Women should opt for a life insurance policy to financially protect their loved ones.
Life Insurance Corporation of India offers a life insurance policy specifically designed for women. LIC Aadhaar Shila is an endowment plan specifically designed for women.
This article will guide you about LIC Aadhaar Shila Plan by dissecting its Advantages(pros) and Disadvantages(cons) and help you to make an informed decision on whether the LIC Aadhaar Shila is a Good or Bad decision that you can make.
Let’s get started!
1.)What is LIC Aadhaar Shila?
2.)What are the Features of LIC Aadhaar Shila? Quick Analysis
3.)Who is eligible for LIC Aadhaar Shila?
4.)What are the Benefits of LIC Aadhaar Shila? Review in Detail
5.)What is the Grace Period, Paid-up, and Revival of LIC Aadhaar Shila?
6.)What is the Free-Look period of LIC Aadhaar Shila?
7.)When can you Surrender LIC Aadhaar Shila?
8.)What are the Advantages of LIC Aadhaar Shila?
9.)What are the Disadvantages of LIC Aadhaar Shila?
10.)Research Methodology of LIC Aadhaar Shila
11.)LIC Aadhaar Shila vs Other Investment Options
12.)LIC Aadhaar Shila VS Other Investment Options – Review Conclusion
13.)Final Verdict on LIC Aadhaar Shila – Good or Bad?
The Aadhaar Shila life insurance product from LIC is a participating, non-linked policy that is specifically intended for females. This plan offers a lump sum payment to the surviving policyholder at maturity, as well as financial support for the family in the tragic event of the policyholder’s death at any point prior to maturity.
Refer to the official brochure of LIC Aadhaar Shila for more policy details.
| Minimum | Maximum | |
| Age at entry | 8 years | 55 years |
| Age at Maturity | 18 years | 70 years |
| Basic Sum Assured | 2 Lakhs | 5 Lakhs |
| Policy Term | 10 – 20 years | |
| Premium paying term | Same as Policy Term | |
Death Benefit – Analysis
Death Benefit payable on death of the Life Assured during the Policy Term provided all due premiums have been paid then:
On death during first five years of LIC Aadhaar Shila Policy: “Sum Assured on Death” shall be payable.
On death after completion of five LIC Aadhaar Shila policy years but before the date of maturity: “Sum Assured on Death” and Loyalty Addition, if any, shall be payable.
Where “Sum Assured on Death” is defined as the higher of
Maturity Benefit – Analysis
On Life assured surviving to the end of LIC Aadhaar Shila Policy Term, provided all due premiums have been paid, “Sum Assured on Maturity” along with Loyalty Addition, if any, shall be payable. Where “Sum Assured on Maturity” is equal to Basic Sum Assured.
Provided the LIC Aadhaar Shila policy has completed five policy years and at least 5 full years’ premium have been paid, then the plan shall be eligible for Loyalty Addition at the time of maturity or death.
Grace Period
LIC Aadhaar Shila provides a grace period of 30 days for payment of yearly half-yearly or quarterly premiums and 15 days for LIC Aadhaar Shila monthly premiums from the date of the first unpaid premium.
Paid-up
If less than two years of LIC Aadhaar Shila premiums have been paid and any subsequent premiums are not duly paid, all the benefits under the LIC Aadhaar Shila policy shallstop.
If, after at least two full years of LIC Aadhaar Shila premiums have been paid and any subsequent premiums be not duly paid, the LIC Aadhaar Shila policy shall continue as a paid-up policy till the end of the Policy Term. However, if at least three full years of LIC Aadhaar Shila premiums have been and any subsequent premiums are not duly paid, under such policies Auto Cover Period shall be applicable.
Revival
A LIC Aadhaar Shila lapsed policy can be revived within a period of 5 consecutive years from the date of first unpaid premium but before the date of Maturity.
If the LIC Aadhaar Shila Policyholder is not satisfied with the “Terms and Conditions” of the policy, the LIC Aadhaar Shila policy may be returned to the Corporation within 30 days from the date of receipt of the electronic or physical mode of the policy bond, whichever is earlier, stating the reasons for objections.
The LIC Aadhaar Shila policy can be surrendered at any time provided premiums have been paid for at least two consecutive years. On surrender of the LIC Aadhaar Shila policy, the Corporation shall pay the Surrender Value equal to higher of Guaranteed Surrender Value and Special Surrender Value.
To make an informed decision, you should carefully look at the policy details like cash flow and returns. So, let us take one step further in our analysis. We shall evaluate LIC Aadhaar Shila in terms of return on investment. A quote is taken from the LIC website to calculate the Internal Rate of Return (IRR).
A 35-year-old woman wants to take LIC Aadhaar Shila for a Sum Assured of ₹ 5 Lakhs. The Policy Term and the premium paying term is 15 years. The annualised premium is ₹ 26,435.
| Female | 35 years |
| Sum Assured | 5,00,000 |
| Policy Term | 15 years |
| Premium Paying Term | 15 years |
| Annualised Premium | 26,435 |
LIC Aadhaar Shila is a participating policy. In preparing this benefit illustration, it is assumed that the Projected Investment Rate of Return that LICI will be able to earn throughout the term of the policy will be 4% p.a. or 8% p.a.
The Projected Investment Rate of Return is not guaranteed and they are not the upper or lower limits of what you might get back, as the value of your LIC Aadhaar Shila policy is dependent on a number of factors including actual future investment performance.
| At 4% p.a. | At 8% p.a. | ||||
| Age | Year | Annualised premium / Maturity Benefit | Death Benefit | Annualised premium / Maturity Benefit | Death Benefit |
| 35 | 1 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 36 | 2 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 37 | 3 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 38 | 4 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 39 | 5 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 40 | 6 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 41 | 7 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 42 | 8 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 43 | 9 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 44 | 10 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 45 | 11 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 46 | 12 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 47 | 13 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 48 | 14 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 49 | 15 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 50 | 16 | 5,00,000 | 5,00,000 | 5,57,500 | 5,00,000 |
| IRR | 2.85% | 4.15% | |||
The final maturity value including the loyalty addition under the 4% scenario is ₹ 5 Lakhs. The IRR calculation for the 4% scenario results in 2.85%. The final maturity value including the loyalty addition under the 8% scenario results in is ₹ 5.57 Lakhs. The IRR calculation for the 8% scenario results in 4.15%.
Return on investment, under this plan, is below par than a debt instrument return. The return could not cope with the soaring inflation in the long run.
Also, financial protection is crucial for women who may be the primary breadwinners or single parents responsible for their families’ financial well-being.
In LIC Aadhaar Shila, the Sum Assured is too low. The maximum sum assured under the plan is ₹ 5 lakhs. This will not replace the income to meet the family’s needs.
Single women, especially those with dependents, may need a proper financial plan to meet their financial responsibilities. In the earlier section, we saw that LIC Aadhaar Shila falls short of the expected return. So, in this section, let us look for alternate options. We need to meet both insurance and insurance components while looking for alternates.
A pure term life cover for a sum assured ₹ 5 Lakhs would cost ₹ 2,500. The Policy Term and the premium paying term is 15 years. Out of 26,435 you were left with 23,935 for investment. Selecting an investment avenue that aligns with your risk profile is an important aspect of financial planning. Risk-averse investors can choose debt instruments and those who are ready to take risk can go for equity investments.
| Pure Term Life Insurance Policy | |
| Sum Assured | 5,00,000 |
| Policy Term | 15 years |
| Premium Paying Term | 15 years |
| Annualised Premium | 2,500 |
| Investment | 23,935 |
PPF (Debt instrument) and ELSS (Equity instrument) are chosen here for investment. You will get the accumulated value in the PPF account at the end of 15 years. You will have to pay the capital gains tax while exiting the ELSS fund at the end of 15 years. Tax calculation is given below.
| Term Insurance + PPF | Term insurance + ELSS | ||||
| Age | Year | Term Insurance premium + PPF | Death Benefit | Term Insurance premium + ELSS | Death Benefit |
| 35 | 1 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 36 | 2 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 37 | 3 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 38 | 4 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 39 | 5 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 40 | 6 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 41 | 7 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 42 | 8 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 43 | 9 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 44 | 10 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 45 | 11 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 46 | 12 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 47 | 13 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 48 | 14 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 49 | 15 | -26,435 | 5,00,000 | -26,435 | 5,00,000 |
| 50 | 16 | 6,49,151 | 5,00,000 | 9,45,331 | 5,00,000 |
| IRR | 5.94% | 10.26% | |||
| ELSS Tax Calculation | |
| Maturity value after 15 years | 9,99,365 |
| Less | |
| Purchase price | 3,59,025 |
| Long term capital gains | 6,40,340 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 5,40,340 |
| Tax paid on LTCG | 54,034 |
| Maturity value after tax | 9,45,331 |
The final value of PPF investment is ₹ 6.49 Lakhs and the IRR calculation for Pure Term Insurance + PPF investment results in 5.94%. The pre-tax value is ₹ 9.45 Lakhs under ELSS investment. The IRR calculation for Pure Term Insurance + ELSS investment results in 10.26% (post-tax return). This return helps you to combat inflation in the long run which is missing in LIC Aadhaar Shila.
The lesson learned from this IRR Analysis is that Insurance and Investment shouldn’t be mixed up.
Lets look at the features of LIC Single Premium Endowment Plan,
You can read the complete review of LIC Single Premium Endowment Plan here.
Let’s look at the features of LIC New Jeevan Shanti,
You can read the complete review of LIC New Jeevan Shanti here.
After the IRR analysis of LIC Aadhaar Shila and comparing it with Term Insurance + PPF or ELSS we learned that Insurance and Investment shouldn’t be mixed up. This holds true after comparing LIC Aadhaar Shila with other investment options too. None of the alternate insurance policies are capable of beating the combination of Pure Term Insurance + PPF or ELSS.
Insurance can provide emotional peace of mind, particularly important for women who may be concerned about the financial well-being of their families in their absence.
LIC Aadhaar Shila is a non-linked, with-profit, limited premium payment endowment assurance plan designed primarily for women. It comes with simple features and benefits tailored to the financial needs and security of women.
The plan specifically says that it is designed to provide financial protection and savings for women. But we couldn’t find any special feature to mark it for women.
This is any other endowment plan available in the market.
The major drawbacks are, that the sum assured is inadequate and the returns are below average. One of the major reasons for poor returns is high agent commission cost. Alternatively, if you opt for a pure-term life insurance, you can ensure your family’s financial stability.
Avoid making emotional and uninformed decisions by just reading amateur advice on social media sites such as Quora, Facebook, Twitter, etc.Consult your financial planner to draft a tailor-made financial plan for yourself.
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