Investing in life goals is crucial for achieving financial security and realizing your aspirations. By investing wisely, you can work towards goals such as retirement, homeownership, education, and travel, ensuring a better quality of life.
Life Insurance Corporation of India offers the Aadhaar Stambh plan which is a combination of protection and savings. In this article, let us review the LIC Aadhaar Stambh by analyzing its Advantages(pros) and Disadvantages(cons). Will this LIC Aadhaar Stambh prove to be a Good or Bad investment option for your future?
Buckle up for a detailed analysis!
Table of Contents
1.)What is LIC Aadhaar Stambh?
2.)What are the Features of LIC Aadhaar Stambh?
3.)Who is eligible for LIC Aadhaar Stambh?
4.)Review of Benefits in detail under LIC Aadhaar Stambh
5.)Grace Period, Paid-up and Revival of LIC Aadhaar Stambh
6.)Free-Look period of LIC Aadhaar Stambh
7.)Surrendering LIC Aadhaar Stambh
8.)Advantages of LIC Aadhaar Stambh – Analysis
9.)Disadvantages of LIC Aadhaar Stambh – Analysis
10.)Research Methodology of LIC Aadhaar Stambh
- Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis
- LIC Aadhaar Stambh Vs. Pure Term + PPF / ELSS
- LIC Aadhaar Stambh Vs. LIC Bima Jyoti
- LIC Aadhaar Stambh Vs. LIC New Jeevan Shanti
1. What is LIC Aadhaar Stambh?
It is a Non-Linked, Participating, Individual, Savings Life Insurance plan designed exclusively for male lives. In the terrible event that the policyholder passes away before maturity, this plan offers financial help to the family. If the policyholder survives to maturity, he or she will receive a lump sum payment.
You can refer to the official brochure for more policy details here
2. What are the Features of LIC Aadhaar Stambh?
- Premium paying term and the policy term are the same.
- The Policy term in LIC Aadhaar Stambh ranges from 10 to 20 years.
- Loyalty additions enhance the Maturity Benefit.
- Auto cover option kicks in even if the premium is unpaid for 6 months provided at least 3 full years’ premium have been paid.
3. Who is eligible for LIC Aadhaar Stambh?
|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 the policy term|
4. Review of Benefits in detail under LIC Aadhaar Stambh
Death Benefit – Analysis
Death Benefit payable on the death of the Life Assured during the policy term provided all due premiums have been paid then:
In the event of death within the first five years: the “Sum Assured on Death” will be payable.
On death, following the completion of five policy years but before the date of maturity: The “Sum Assured on Death” and any applicable loyalty addition will be paid.
where the definition of “Sum Assured on Death” is evaluated as the higher of,
- 7 times of annualised premium; or
- 100% of Basic Sum Assured.
- The Death Benefit shall not be less than 105% of the total premiums paid up to the date of death.
Maturity Benefit – Analysis
“Sum Assured on Maturity” and any applicable loyalty addition will be paid out if the life assured survives to the end of the policy term and all premiums have been paid. where Basic Sum Assured equals “Sum Assured on Maturity”.
Loyalty Addition – Analysis
Provided the LIC Aadhaar Stambh 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.
5. The Grace Period, Paid-up and Revival of LIC Aadhaar Stambh
In LIC Aadhaar Stambh, a grace period of 30 days will be allowed for payment of yearly half-yearly, or quarterly premiums and 15 days for monthly premiums from the date of the first unpaid premium.
If less than two years’ premiums have been paid and any subsequent premium is not duly paid, all the benefits under the LIC Aadhaar Stambh Policy shall cease.
If, after at least two full years’ premiums have been paid and any subsequent premiums are not duly paid, the LIC Aadhaar Stambhpolicy shall continue as a paid-up policy till the end of the policy term. However, if at least three full years’ premiums have been and any subsequent premiums are not duly paid, under such LIC Aadhaar Stambh policies, the Auto Cover Period shall be applicable.
Reviving a lapsed LIC Aadhaar Stambh policy can take place five years in a row starting from the date of the first unpaid premium, but not before the policy’s maturity date.
6. A Free-Look period of LIC Aadhaar Stambh
If the LIC Aadhaar Stambh Policyholder is not satisfied with the “Terms and Conditions” of the policy, the LIC Aadhaar Stambh policy may be returned to the Corporation within 30 days from the date of receipt of the Policy bond in either its physical or electronic form, whichever is earlier, together with reasons for objections.
7. Surrendering LIC Aadhaar Stambh
The LIC Aadhaar Stambh policy can be surrendered at any time provided premiums have been paid for at least two consecutive years. On surrender of the LIC Aadhaar Stambh policy, the Corporation shall pay the Surrender Value equal to the higher Guaranteed Surrender Value and Special Surrender Value.
8. Advantages of LIC Aadhaar Stambh – Analysis
- Option to take Death Benefit in installments over the chosen period of 5 years instead of a lump sum amount
- Loan can be availed and the maximum loan amount is 90% of the surrender value.
- Riders enhance the life cover.
- Option to receive Maturity Benefit in installments over the chosen period of 5 years instead of a lump sum amount.
- The auto cover period is an added advantage.
9. Disadvantages of LIC Aadhaar Stambh – Analysis
- Sum Assured is inadequate to meet the basic needs of the family in case of eventualities.
- The return on investment is poor in LIC Aadhaar Stambh.
- Loyalty addition starts after the completion of 5 years.
10. Research Methodology of LIC Aadhaar Stambh
Your investment should pave the way to a bright future. To accomplish this the return on investment should outpace the inflation.
Now, let us evaluate the performance of LIC Aadhaar Stambh by calculating the Internal Rate of Return (IRR). This will help us compare the returns of LIC Aadhaar Stambh with other investment returns.
Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis
A 35-year-old male buys LIC Aadhaar Stambh for a sum assured of ₹ 5 Lakhs. The policy term and the premium paying term are 15 years. The annualised premium is ₹ 26,459.
|Policy Term||15 years|
|Premium Paying Term||15 years|
LIC Aadhaar Stambh is a nonprofit 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 policy is dependent on a number of factors including actual future investment performance.
|Age||Year||At 4% p.a.||At 8% p.a.|
|Annualised premium / Maturity Benefit||Death Benefit||Annualised premium / Maturity Benefit||Death Benefit|
In the above illustration, the final maturity value including the loyalty addition under the 4% scenario is ₹ 5 Lakhs. The IRR calculation for the 4% scenario results in 2.84%. The final maturity value including the loyalty addition under the 8% scenario is ₹ 5.57 Lakhs. The IRR calculation for the 8% scenario results in 4.14%.
Your investments should grow over time, outpacing inflation, and providing a safety net for unexpected expenses. Investment and Life cover both these components are not beneficial under LIC Aadhaar Stambh. The maximum sum assured is ₹ 5 lakhs which will not even cover the basic needs of the family. The return on investment is also low.
11. LIC Aadhaar Stambh vs Other Investments Options
You should have an adequate life cover before starting your investment journey. Here, in the previous illustration, the sum assured is low. But in order to have a comparison, we assume the same sum assured.
A pure term life insurance policy for ₹ 5 lakhs is opted to meet the insurance component and invest separately for life goals.
i) LIC Aadhaar Stambh Vs. Pure Term + PPF / ELSS
A pure term life cover for a sum assured ₹ 5 Lakhs would cost ₹ 2,500. The policy term and the premium paying term are 15 years. Out of 26,459, you were left with 23,959 for investment. Select an investment avenue that aligns with your risk profile.
|Pure Term Life Insurance Policy|
|Policy Term||15 years|
|Premium Paying Term||15 years|
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.
|Age||Year||Term Insurance + PPF||Term insurance + ELSS|
|Term Insurance premium + PPF||Death Benefit||Term Insurance premium + ELSS||Death Benefit|
|ELSS tax Calculation|
|Maturity value after 15 years||10,00,367|
|Long-term capital gains||6,40,982|
|Tax paid on LTCG||54,098|
|Maturity value after tax||9,46,269|
In the above illustration, the final value of PPF investment is ₹ 6.49 Lakhs and the IRR calculation for Pure Term Insurance + PPF investment results in 5.95%.
The pre-tax value is ₹ 10 Lakhs under ELSS investment which is double that of LIC Aadhaar Stambh 4% scenario. The IRR calculation for Pure Term Insurance + ELSS investment results in 10.26%.
LIC Adhar Stambh is not the right choice in any aspect. Investment and insurance shouldn’t be mixed up. By investing wisely, you can work towards goals ensuring a better quality of life.
ii) LIC Aadhaar Stambh vs LIC Bima Jyoti
Some of the features of LIC Bima Jyoti are,
- Premium payments under LIC Bima Jyoti can be made on a yearly, half-yearly, quarterly, or monthly basis.
- As long as you pay the premium on time and without default, you will enjoy the benefits as promised in the brochure.
- By adding five more riders, you can improve the life insurance.
Please read the complete review of LIC Bima Jyoti here.
iii) LIC Aadhaar Stambh vs LIC New Jeevan Shanti
Some of the features of LIC New Jeevan Shanti are,
- Annuity and a single premium payment are made following the conclusion of the deferment term.
- Fixed annuity rates from the policy’s inception.
- There are several alternatives for annuities.
Please read the complete review of LIC New Jeevan Shanti here.
12. LIC Aadhaar Stambh vs Other Investment Options – Review Conclusion
As readers, you will discover that Pure Term Insurance + ELSS or PPF is a superior alternative to the LIC Aadhaar Stambh Plan after we compared it with other investment options. This is because, in contrast to the latter, the former has separate components for investments and insurance.
13. Final Verdict on LIC Aadhaar Stambh – Good or Bad?
LIC Aadhaar Stambh plan is a plain vanilla endowment plan. You need to pay the premium regularly and the Maturity Benefit along with loyalty additions is available at the end of the policy term. While analysing the plan, there is no special feature that stands out to pick this plan.
The major drawbacks of LIC Aadhaar Stambh that are not revealed to you by insurance agents for their agent commission are, low Sum Assured and the return not outpacing the inflation. Returns are a key aspect of a long-term investment.
Alternatively, you can go with a pure-term life insurance plan. Be mindful while calculating the required sum assured. A diversified investment portfolio will help you in achieving your life goals.
Start early, and make informed decisions by consulting a professional financial planner instead of just gaining information from social media sites such as Quora, Facebook, Twitter, etc. You can sit back and watch your investments pave the way to a brighter future.