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When I visited my relatives’ house, I saw him reviewing some documents. That’s when I noticed those were insurance documents.
Then I asked, “Why do you need them?”
He said, “What a silly question is that? Of course for financial security. It is a double benefit plan. In this way, I can grow my wealth and can get life protection. It can give me guaranteed benefit when I retire.”
Then I noticed that they are not some insurance plan documents but rather insurance plus savings schemes.
So, I again asked, “Why do you need them?”
“How sure are you about the guaranteed benefit.”
“How sure are you that it can help you to replace your retirement income?”
“How sure are you about beating the inflation rate?”
Imagine, that there are many insurance plans available that can give you both savings and life protection.
Some of LIC’s insurance plans are also available under these schemes.
But is it worth adding them to your investment portfolio?
Here, in this article, we are going to analyse the LIC Dhan Sanchay and discover whether you should add this plan to your investment portfolio or not.
Table of Content:
1.) What is LIC Dhan Sanchay Policy?
2.) Features of LIC Dhan Sanchay Plan
3.) Benefit Options of LIC Dhan Sanchay Plan
4.) Eligibility of LIC Dhan Sanchay Plan
5.) Benefits of LIC Dhan Sanchay Plan
6.) IRR of LIC Dhan Sanchay Plan
7.) LIC Dhan Sanchay vs. PPF + Term Insurance
8.) LIC Dhan Sanchay vs. ELSS + Term Insurance
9.) Advantages of LIC Dhan Sanchay Plan
10.) Disadvantages of LIC Dhan Sanchay Plan
11.) How to cancel the LIC Dhan Sanchay Plan during the free look period?
12.) How to surrender the LIC Dhan Sanchay Plan during the free look period?
13.) Final Verdict on LIC Dhan Sanchay Plan Review
What is LIC Dhan Sanchay Policy?
LIC Dhan Sanchay policy is a non-linked, individual insurance plan that offers both savings and life protection. This plan promises a guaranteed payout when the policy matures. The LIC Dhan Sanchay plan claims that this plan can help the policyholder’s family if something unfortunate happens to the policyholder.
Features of LIC Dhan Sanchay Plan:
- LIC Dhan Sanchay Plan is an individual, non-linked, insurance cum savings plan.
- There are 4 options to choose from. The premium paying term & other benefits will be decided based on this option.
- The loan option is available.
Benefit Options of LIC Dhan Sanchay Plan:
| Option | Feature |
| Option A | Limited/Regular premium – Level income benefit |
| Option B | Limited/Regular premium – Increasing income benefit |
| Option C | Single premium – Level income benefit |
| Option D | Single premium – Enhanced cover with level income benefit |
Eligibility of LIC Dhan Sanchay Plan:
Benefits of LIC Dhan Sanchay Plan:
Death Benefit:
A death benefit is payable on death if the policyholder passes away, unfortunately before the maturity of the policy.
The death benefit shall be paid as a lump sum or through instalments over 5 years.
The death benefit can be varied based on the benefit option chosen by the policyholder.
Options A & B:
Sum Assured on Death shall be paid from the highest of the following.
- 11 times of annual premium
- Sum Assured on Maturity
- 105% of the total premium paid
Option: C
- Sum Assured on Death
- 1.25 times a single premium
- Sum Assured on Maturity
Option: D
Sum Assured will be 11 times a single premium
Maturity Benefit:
Maturity benefits shall be paid in the form of Guaranteed Income Benefit and Guaranteed Terminal Benefit.
Guaranteed Income Benefit:
It is payable in advance during the Pay-out Period from the date of maturity and thereafter, based on the Pay-out Mode opted by the policyholder.
On the death of the Life Assured during the Pay-out Period, the Guaranteed Income Benefit shall continue to be paid to the nominee.
Guaranteed Income Benefit =Annualised/Single Premium X GIB Multiple X Modal factors for GIB
GIB Multiples applicable for Option A & Option B are as under:
|
option |
Policy Term | Premium
Paying Term |
Payout
Period |
GIB
Multiple |
|
Option A – Level Income Benefit |
10 | 5 | 5 | 1.10 |
| 10 | 10 | 10 | 1.30 | |
| 15 | 5 | 5 | 1.40 | |
| 15 | 10 | 10 | 1.60 | |
| 15 | 15 | 15 | 1.65 | |
|
Option B – Increasing Income Benefit |
10 | 5 | 5 | 1.00 |
| 10 | 10 | 10 | 1.05 | |
| 15 | 5 | 5 | 1.25 | |
| 15 | 10 | 10 | 1.30 | |
| 15 | 15 | 15 | 1.30 |
GIB Multiples applicable for Option C & Option D are as under:
| option | Policy Term | Payout
Period |
GIB
Multiple |
| Option C: Single Premium Level Income Benefit | 5 | 5 | 0.25 |
| 10 | 10 | 0.18 | |
| 15 | 15 | 0.16 | |
| Option D: Single Premium
enhanced cover with Level Income Benefit |
5 | 5 | 0.20 |
| 10 | 10 | 0.15 | |
| 15 | 15 | 0.10 |
The applicable Modal Factor for GIB shall be as under:
| Payout Mode | Modal factor for GIB |
| Yearly | 1.0000 |
| Half-yearly | 0.5050 |
| Quarterly | 0.2537 |
| Monthly | 0.0850 |
Guaranteed Terminal Benefit:
Guaranteed Terminal Benefit (GTB) as a lump sum payment shall be payable along with the last installment of Guaranteed Income Benefit (GIB)
Guaranteed Terminal Benefit= Annualized/Single Premium X GTB Multiple X Modal factor for GTB
| Option | Age at Entry | GTB Multiple for Policy Term (Payout Period) | ||||
| 10 (5) | 10(10) | 15 (5) | 15 (10) | 15 (15) | ||
| Option A -Level Income Benefit |
20 | 1.9659 | 2.0372 | 2.7260 | 3.7996 | 5.1431 |
| 40 | 1.7459 | 1.8202 | 2.2881 | 3.2762 | 4.0068 | |
| Option B – Increasing
Income Benefit |
20 | 1.9986 | 2.5316 | 2.9028 | 4.2653 | 4.2260 |
| 40 | 1.7787 | 2.3151 | 2.4649 | 3.7447 | 3.0958 | |
| Option | Age at Entry | GTB Multiple for Policy Term (Payout Period) | ||
| 5 (5) | 10 (10) | 15 (15) | ||
| Option C: Single Premium Level
Income Benefit |
20 | 0.1627 | 0.3724 | 0.9277 |
| 40 | 0.1615 | 0.3606 | 0.8707 | |
| Option D: Single Premium enhanced
cover with Level Income Benefit |
20 | 0.3568 | 0.5014 | 1.6821 |
| 40 | 0.2572 | 0.0469 | 0.2216 | |
| Payout Mode | Modal factor for GIB |
| Yearly | 1.000 |
| Half-yearly | 1.020 |
| Quarterly | 1.035 |
| Monthly | 1.045 |
Optional Benefits of LIC Dhan Sanchay:
a. Rider Benefit:
For Option A & B
LIC’s Accidental Death and Disability Benefit Rider (UIN: 512B209V02)
LIC’s Accident Benefit Rider (UIN:512B203V03)
LIC’s New Term Assurance Rider (UIN: 512B210V01)
LIC’s New Critical Illness Benefit Rider (UIN: 512A212V02)
LIC’s Premium Waiver Benefit Rider (UIN: 512B204V03)
For Option C & D
LIC’s Accidental Death and Disability Benefit Rider (UIN: 512B209V02)
LIC’s New Term Assurance Rider (UIN: 512B210V01)
b. Option to take death benefit in instalment:
The policyholder has the option to receive the death benefit through instalments over 5 years. This shall be paid in yearly, half-yearly, quarterly, and monthly modes.
| Mode of Instalment | Minimum Instalment amount |
| Monthly | 5,000 |
| Quarterly | 15,000 |
| Half-Yearly | 25,000 |
| Yearly | 50,000 |
c. Option to receive the maturity benefit in Lumpsum:
If the Life Assured / Policy holder chooses this option under an existing policy, a lump sum equal to the “Sum Assured on Maturity” will be paid.
“Sum Assured on Maturity = Annualized/ Single Premium multiplied by Maturity Benefit Multiplier.”
Sample Maturity Benefit Multiplier applicable for the options are as under:
| Option | Age at Entry | Maturity Benefit Multiplier for Policy Term(Payout Period) | ||||
| 10 (5) | 10(10) | 15 (5) | 15 (10) | 15 (15) | ||
| Option A-Level Income Benefit | 20 | 6.4688 | 11.3480 | 8.4104 | 14.7317 | 19.2615 |
| 40 | 6.4687 | 11.3376 | 8.0635 | 14.4219 | 18.7589 | |
| Option B-Increasing IncomeBenefit | 20 | 0.3568 | 0.5014 | 8.4063 | 14.7064 | 19.2182 |
| 40 | 6.2945 | 11.2095 | 8.0595 | 14.3983 | 18.7183 | |
| Option | Age at Entry | GTB Multiple for Policy Term (Payout Period) | ||
| 5(5) |
10(10) |
15(15) |
||
| Option C: Single Premium Level Income Benefit | 20 | 1.2452 | 1.6247 | 2.0575 |
| 40 | 1.2442 | 1.6177 | 2.0323 | |
| Option D: Single Premium enhanced cover with Level Income Benefit | 20 | 1.1756 | 1.4670 | 1.7735 |
| 40 | 1.0967 | 1.1980 | 1.1275 | |
d. Option to commute the outstanding instalment during the payout period:
If the Life Assured / Policy holder chooses this option under an existing policy, a lump sum equal to the “Sum Assured on Maturity” will be paid.
Under the in-force policy, the lump sum shall be payable from the highest of the following:
- Sum Assured on Maturity minus sum total of Guaranteed Income Benefit already paid; or
- The discounted value of outstanding pay-outs i.e. unpaid Guaranteed Income Benefit and Guaranteed Terminal Benefit.
Under the paid-up policy, the lump sum shall be payable from the highest of the following:
- Maturity Paid-up Sum Assured minus sum total of Reduced Guaranteed Income Benefit already paid; or
- The discounted value of outstanding pay-outs i.e. unpaid Reduced Guaranteed Income Benefit and Reduced Guaranteed Terminal Benefit.
Payment of Premium LIC Dhan Sanchay Plan:
Premium can be paid through yearly, half-yearly, quarterly and monthly modes or through salary deduction.
Grace Period:
The grace period is available only for options A and B. The grace period is 30 days for yearly, half-yearly, and quarterly modes and 15 days for monthly modes. This grace period applies to the riders’ option.
Revival:
The revival option is available only for options A and B.
The coverage will lapse if the premiums are not paid during the grace period.
A lapsed insurance can be reactivated after 5 years from the date of the First Unpaid Premium but before the date of maturity.
Paid-up value:
The paid-up value is available on options A and B.
If at least two full years’ premiums have been paid and any future premiums have not been paid, the insurance will be considered paid up until the conclusion of the policy term.
‘Death Paid-up Sum Assured’ = Sum Assured on Death *(The total period for which premiums have already been paid / the maximum period for which premiums were originally payable)
‘Maturity Paid-up Sum Assured’ = “Sum Assured on Maturity” *(the total period for which premiums have already been paid / the maximum period for which premiums were originally payable).
The Reduced Guaranteed Income Benefit = Guaranteed Income Benefit*(“Maturity Paid-up Sum Assured” / “Sum Assured on Maturity”)
Reduced Guaranteed Terminal Benefit = Guaranteed Terminal Benefit *(“Maturity Paid-up Sum Assured” / “Sum Assured on Maturity”)
Policy loan:
The loan option is available before the start of the pay-out period.
For “Option A & B – loan can be provided at least two full years’ premiums have been paid.”
For Option C & D – A loan will be provided after 3 months from the issuance of the policy.
Loan amount:
For Options A & B – In force policy can get up to 90% of the surrender value, Paid-up policy can get up to 80% of the surrender value.
Option C & D – Up to 75% of surrender value
IRR of LIC Dhan Sanchay Plan:
Now, let’s calculate the IRR of the LIC Dhan Sanchay Plan by using the LIC return calculator for 4 options.
Option: A
Annual Premium: Rs. 1,00,000
Premium Term: 15 years
Policy Term: 30 years
In option A, we will get an IRR of 4.18%. At the end of the policy term, we will get Rs. 5,65,680 as maturity benefit and Rs. 11, 00, 000 as the death benefit. We will get a Guaranteed payout from the
16th policy term onwards.
Option: B
Annual Premium: Rs. 1,00,000
Premium Term: 15 years
Policy Term: 30 years
| Option B | |||
| Age | Year | Option B | Death Benefit |
| 41 | 1 | -1,00,000 | 11,00,000 |
| 42 | 2 | -1,00,000 | 11,00,000 |
| 43 | 3 | -1,00,000 | 11,00,000 |
| … | … | … | … |
| 55 | 15 | -1,00,000 | 11,00,000 |
| 56 | 16 | -1,30,000 | |
| … | … | … | |
| 70 | 30 | 5,66,971 | |
| IRR | 4.53% | ||
In Option B, we will get an IRR of 4.53%. At the end of the 30 years, we will get the maturity benefit of Rs. 5, 66, 971 and a death benefit of Rs. 11, 00, 000. From the 16th policy term onwards we will get a guaranteed payout.
Option: C
Annual Premium: Rs. 10,00,000 (lumpsum)
Policy Term: 30 years
| Option C | |||
| Age | Year | Option B | Death Benefit |
| 41 | 1 | -10,00,000 | 12,50,000 |
| 42 | 2 | 0 | 12,50,000 |
| 43 | 3 | 0 | 12,50,000 |
| … | … | … | … |
| 55 | 15 | 0 | 12,50,000 |
| 56 | 16 | -1,60,000 | |
| … | … | … | |
| 70 | 30 | 10,30,700 | |
| IRR | 5.23% | ||
If we purchase the policy by paying a single premium term, then at the end of the policy term, we will get an IRR of 5.23% and Rs. 10,30,700 as the maturity benefit and Rs. 12,50,000 as the death benefit.
Option: D
Annual Premium: Rs. 10,00,000 (lumpsum)
Policy Term: 30 years
| Option C | |||
| Age | Year | Option B | Death Benefit |
| 41 | 1 | -10,00,000 | 1,10,00,000 |
| 42 | 2 | 0 | 1,10,00,000 |
| 43 | 3 | 0 | 1,10,00,000 |
| … | … | … | … |
| 55 | 15 | 0 | 1,10,00,000 |
| 56 | 16 | -1,00,000 | |
| … | … | … | |
| 70 | 30 | 3,21,600 | |
| IRR | 2.43% | ||
Then from the 16th year onwards, we will get Guaranteed Income and at the end of the policy term, we will get an IRR of 2.43%. After 30 years, we will get a maturity benefit of Rs. 3, 21, 600, and Rs. 1,10,00, 000 as death benefit.
| Investment Options | IRR (Internal Rate of Return) | Maturity Benefit in lacs | Death Benefit in lacs |
| Option A | 4.18% | 5.65 | 11 |
| Option B | 4.53% | 5 | 11 |
| Option C | 5.23% | 10 | 12.50 |
| Option D | 2.43% | 3 | 1.10 cr |
Now, let us analyse by comparing the LIC Dhan Sanchay Plan with other investments and check whether LIC Dhan Sanchay gives us a better return or not.
LIC Dhan Sanchay vs. PPF + Term Insurance:
Overall contribution Rs. 1,00,000
Term Insurance:
Annual Premium: Rs. 7,500
Tenure: 15 years
Sum Assured: Rs. 11,00,000
PPF Contribution: 92,500
Interest rate: 7.10% without taking any investment risk
| Term Insurance + PPF | |||
| Age | Year | Term Insurance + PPF | Death Benefit |
| 41 | 1 | -1,00,000 | 11,00,000 |
| 42 | 2 | -1,00,000 | 11,00,000 |
| 43 | 3 | -1,00,000 | 11,00,000 |
| … | … | … | … |
| 55 | 15 | -1,00,000 | 11,00,000 |
| 56 | 16 | 1,50,000 | |
| … | … | … | |
| 70 | 30 | 24,61,436 | |
| IRR | 6.23% | ||
At the end of the 30 years, we will get an IRR of 6.23% and Rs. 24, 61, 436 as investment return.
| Investment Options | IRR (Internal Rate of Return) | Maturity Benefit in lacs | Death Benefit in lacs |
| Option A | 4.18% | 5.65 | 11 |
| Option B | 4.53% | 5 | 11 |
| Option C | 5.23% | 10 | 12.50 |
| Option D | 2.43% | 3 | 1.10 cr |
| PPF + Term | 6.23% | 24 | 11 |
Observation:
LIC Dhan Sanchay is not able to beat the returns from PPF. Term insurance + PPF combination provides better returns along with the life cover and tax benefits,
LIC Dhan Sanchay vs. ELSS + Term Insurance:
Overall contribution Rs. 1,00,000
Term Insurance:
Annual Premium: Rs. 7,500
Tenure: 15 years
Sum Assured: Rs. 11,00,000
ELSS Contribution: 92,500
Assumed Interest rate: 12% with investment risk
| Term Insurance + ELSS | |||
| Age | Year | Term Insurance + ELSS | Death Benefit |
| 41 | 1 | -1,00,000 | 11,00,000 |
| 42 | 2 | -1,00,000 | 11,00,000 |
| 43 | 3 | -1,00,000 | 11,00,000 |
| … | … | … | … |
| 55 | 15 | -1,00,000 | 11,00,000 |
| 56 | 16 | 1,50,000 | |
| … | … | 1,50,000 | |
| 70 | 30 | 99,11,813 | |
| IRR | 10.48% | ||
At the end of the 30 years, we will get an IRR of 10.48% and Rs. 99,11,813 as investment return. After adjusting for tax liability, we will get Rs. 91,19,276 as post-tax maturity value.
| Investment Options | IRR (Internal Rate of Return) | Maturity Benefit in lacs | Death Benefit in lacs |
| Option A | 4.18% | 5.65 | 11 |
| Option B | 4.53% | 5 | 11 |
| Option C | 5.23% | 10 | 12.50 |
| Option D | 2.43% | 3 | 1.10 cr |
| ELSS + Term | 10.48% | 91 | 11 |
Observation:
ELSS + Term insurance combination provides a much higher return compared to LIC Dhan Sanchay.
Though Mutual Fund ELSS has market risk, it provides
- Better long-term return
- Inflation Beating Return
- Higher Risk Premium Return.
Advantages of LIC Dhan Sanchay Plan:
- There are four alternative benefit options from which to pick.
- The flexibility to receive the death benefit in instalments.
- The maturity benefits (payouts) are available in a lump sum.
- Because it is not tied to the market and is non-participating insurance, the benefits are assured.
- There is a loan facility available.
- Option D has a higher life cover than the other alternatives. However, the payoff is lower (will get a low IRR value).
Disadvantages of LIC Dhan Sanchay Plan:
- The lock-in duration is two years (for paid-up/surrendered accounts).
- Though there are four alternatives to pick from, once chosen, they cannot be changed.
- The payouts cannot completely replace your retirement income.
- It is neither a good insurance plan nor a good investment plan.
- Option C’s maturity benefit is taxed. Because it does not meet the conditions of Section 10, (10D). (It must be at least ten times the annualised or single premium.)
- Though there is an option to receive the death benefit in instalments, the rate at which it is calculated is 5 years semi-annual G sec rate minus 2%, which is quite low.
- The coverage can be abandoned after two years, but you will not be reimbursed for any premiums paid thus far.
How to cancel the LIC Dhan Sanchay Plan during the free look period?
If the policyholder is not satisfied with the terms and conditions, then he can surrender the policy by stating the reason within 30 days from the date of the policy purchased.
How to surrender the LIC Dhan Sanchay Plan during the free look period?
“Options A and B – can be surrendered at any point throughout the insurance term as long as at least two full years’ premiums have been paid.”
Options C and D – Can be cancelled at any point throughout the insurance term.
Options A & B
The Guaranteed Surrender Value = The total premiums paid * The Guaranteed Surrender Value factor.
| Guaranteed Surrender Value factors for Option A & Option B | ||
| Policy Year | Policy Term | |
| 10 | 15 | |
| 1 | 0.00% | 0.00% |
| 2 | 30.00% | 30.00% |
| 3 | 35.00% | 35.00% |
| 4 | 50.00% | 50.00% |
| 5 | 50.00% | 50.00% |
| 6 | 50.00% | 50.00% |
| 7 | 50.00% | 50.00% |
| 8 | 65.00% | 54.29% |
| 9 | 90.00% | 58.57% |
| 10 | 90.00% | 62.86% |
| 11 | – | 67.14% |
| 12 | – | 71.43% |
| 13 | – | 75.71% |
| 14 | – | 90.00% |
| 15 | – | 90.00% |
Option C & D
First 3 years – 75% of the single premium
3 years + – 90% of the single premium
For more details, you can read the LIC Dhan Sanchay Plan Brochure here.
Final Verdict on LIC Dhan Sanchay Plan Review:
We are investing our money to grow our wealth. We are taking an insurance plan to secure our family during our absence.
LIC Dhan Sanchay Plan cannot give us an inflation-beating return.
So, if you want to invest your money to grow your wealth, and if you don’t want to take any investment risk then you can choose PPF, RBI bonds, and other risk-free investment plans.
Or if you want, you can choose mutual funds to get an inflation-beating return.
As for life protection, you can choose pure term insurance at the lowest price.
If you have any comments or questions, write them in the comment box below.
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