LIC Dhan Varsha Insurance Plan: Complete Analysis & Review – Should you buy?

Investing in a Life Insurance policy might provide financial safety to your family in the case of your unfortunate absence.

But will it also help you attain your financial goals by acting as your investment?

LIC has launched a single premium plan called ‘Dhan Varsha’. 

In this article, through a thorough analysis, we will be able to find out if the LIC Dhan Varsha endowment plan will yield a better return on investment.

Let’s analyze this policy in-depth to find out its benefits and the Rate of Returns associated with it.

Table of Contents:

1.) What is LIC Dhan Varsha Plan?
2.) Features of LIC Dhan Varsha Plan
3.) Eligibility Criteria of LIC Dhan Varsha Plan
4.) Benefits under LIC Dhan Varsha Plan

• Death Benefit
• Survival Benefit
• Maturity Benefit

5.) Other Benefits of LIC Dhan Varsha Plan
6.)Free Look Period of the LIC Dhan Varsha Plan
7.) Surrendering LIC Dhan Varsha Plan
8.) Advantages of LIC Dhan Varsha Plan
9.) Disadvantages of LIC Dhan Varsha Plan
10.) Research Methodology
11.) IRR of LIC Dhan Varsha Plan
12.) LIC Dhan Varsha Plan VS Other Investment Options
13.) LIC Dhan Varsha Vs. Pure Term Insurance + ELSS
14.) Final Verdict on LIC Dhan Varsha Plan

What is LIC Dhan Varsha Plan?

It is a Non-Linked, Non-Participating, Individual, Savings, Life Insurance Plan. 

It is a single premium policy. This plan provides financial support for your family in case of your unfortunate death during your policy term.

 It also provides a guaranteed lump sum amount on the date the policy matures for the surviving life assured.  

Features of the LIC Dhan Varsha Plan

• You have options to choose your Sum Assured on death, Option 1 – 1.25 times your Tabular premium, or Option 2 – 10 times your Tabular Premium.
• You have the option to choose your Policy Term – 10 years or 15 years.
• The Guaranteed Additions shall accrue at the end of each policy year, throughout your policy term.
• The Premium shall be based on the age at entry of the life-assured policy term and the option chosen.
• Guaranteed Additions shall vary as per the chosen option of your policy term and basic sum assured.

Eligibility Criteria of LIC Dhan Varsha Plan

Let us look at the run-down of the eligibility criteria of this policy to better understand the basic working of this policy at a glance below:

Minimum Age at Entry	3 years (completed) for policy term 15 years
	8 years (completed) for policy term 10 years
Maximum Age at Entry	For Policy term 10 years:
	Option 1: 60 years (nearer birthday)
	Option 2: 40 years (nearer birthday)
	For Policy term 15 years:
	35 years (nearer birthday) for both the options
Minimum Age at Maturity	18 years (completed)
Maximum Age at Maturity	Option 1: 75 years (nearer birthday)
	Option 2: 50 years (nearer birthday)
Policy Term	10 & 15 years
Mode of Premium Payment	Single premium
Minimum Basic Sum Assured	Rs. 1,25,000
Maximum Basic Sum Assured	No Limit (shall be in multiples of Rs. 5,000)

Benefits under LIC Dhan Varsha Plan

Death Benefit:

The death benefit payable, on the death of your life assured during the policy term, shall be “Sum Assured on Death” along with the accrued Guaranteed Additions. 

“Sum Assured on Death” shall depend on the option chosen by the policyholder.

Option 1: 1.25 times Tabular Premium for the chosen Basic Sum Assured

Option 2: 10 times of Tabular Premium for the chosen Basic Sum Assured

Maturity Benefit:

On Life, Assured surviving the stipulated Date of Maturity, “Basic Sum Assured” along with accrued Guaranteed Additions shall be payable.

Guaranteed Additions:

The Guaranteed Additions shall accrue at the end of each policy year, throughout your policy term, and shall depend on the options you have chosen as your Basic Sum Assured and the Policy Term.

Guaranteed Additions (per Rs.1000 Basic Sum Assured)
	Option 1		Option 2
Basic Sum Assured	Policy Term 10 years	Policy Term 15 years	Policy Term 10 years	Policy Term 15 years
Rs. 1,25,000 to Rs. 2,45,000	60	65	25	30
Rs. 2,50,000 to Rs. 6,95,000	65	70	30	35
Rs. 7,00,000 & above	70	75	35	40

Other Benefits of LIC Dhan Varsha Plan

Riders:

• LIC’s Accidental Death and Disability Benefit Rider
• LIC’s New Term Assurance Rider

Settlement option for Maturity benefit:

This is an option for you to receive your Maturity Benefit in installments over a period of 5 years instead of a lump sum amount. 

Option to take Death Benefit in Instalments:

There is an option for you to receive Death Benefit in installments over a period of 5 years instead of a lump sum amount. 

Loan:

The loan can be availed under this policy at any time during the policy term after 3 months from the Date of issuance. 

Free Look Period of the LIC Dhan Varsha Plan

If you are not satisfied with the “Terms and Conditions” of the LIC Dhan Varsha Plan, then it may be returned to the Corporation within 15 days from the date of receipt by the policyholder.

If the policyholder bought this policy through electronic or distance mode, then the free look period will be extended up to 30 days.

Surrendering LIC Dhan Varsha Plan

The policy can be surrendered by the Policyholder at any time during the policy term. 

On surrender of the policy, the Surrender Value is equal to the higher Guaranteed Surrender Value and Special Surrender Value is payable. 

Advantages of LIC Dhan Varsha Plan

• Options to choose your policy term & plan option at your convenience.
• Hassle-free investment option i.e., one-time premium payment.
• You can claim benefits such as Maturity and Death benefits, which are guaranteed.
• A loan facility is available.
• The rider option is to enhance your life cover.

Disadvantages of LIC Dhan Varsha Plan

• The life cover is not adequate.
• The return on your investment cannot combat the inflation rate.
• Locking funds for a longer period which has a low return might end up compromising your financial goals in the future.

For further details, you can refer to LIC Dhan Varsha Policy Brochure.

Research Methodology

So, we have covered all the important information you need about the LIC Dhan Varsha Plan. 

But will this piece of information be sufficient enough for you to decide whether to opt for this policy or not?

Any investment decision that you take should be based on the safety, liquidity & potential returns in the future.

In this LIC Dhan Varsha Plan Policy, the safety factor is assured via guaranteed maturity.

Regarding liquidity you have two options available; 

1. You can either surrender any time after 3 months

or

2. You have to wait for the completion of your policy term.

Now, let us figure out the potential Rate of Return (IRR) of the LIC Dhan Varsha plan using its benefit illustration. Then, we shall compare its Internal Rate of Return (IRR) with other investment alternatives that are available in the market.

This analysis will help you decide if this policy will be a good investment or not in the long term according to its outcome.

IRR of LIC Dhan Varsha Plan

Let us assume the below information to conduct a case study on determining the IRR of this policy.

			Option 1	Option 2
Age	30	Basic Sum Assured	10,00,000	10,00,000
Policy Term	15	Sum Assured on Death	11,08,483	79,87,000
		Single premium	8,86,750	7,98,700

Let us figure out the IRR for both options. The premium given here is for a 30-year-old male. The policy term is 30 years. The sum Assured on death varies depending on the option chosen.

		Option 1		Option 2
Age	Year	Annualized premium / Maturity benefit	Death benefit	Annualized premium / Maturity benefit	Death benefit
30	1	-8,86,750	11,83,483	-7,98,700	80,27,000
31	2	0	12,58,483	0	80,67,000
32	3	0	13,33,483	0	81,07,000
33	4	0	14,08,483	0	81,47,000
34	5	0	14,83,483	0	81,87,000
35	6	0	15,58,483	0	82,27,000
36	7	0	16,33,483	0	82,67,000
37	8	0	17,08,483	0	83,07,000
38	9	0	17,83,483	0	83,47,000
39	10	0	18,58,483	0	83,87,000
40	11	0	19,33,483	0	84,27,000
41	12	0	20,08,483	0	84,67,000
42	13	0	20,83,483	0	85,07,000
43	14	0	21,58,483	0	85,47,000
44	15	0	22,33,483	0	85,87,000
45	16	21,25,000		16,00,000
	IRR	6.00%		4.74%

In the first option, Sum assured on death is just 1.25 times the premium, so the IRR is comparatively on the higher side. 

Whereas in the second option, the Sum assured on death is 10 times the premium. So, the IRR works to be comparatively on the lower side. 

Depending on the death benefit, the IRR varies. Higher the death benefit, the lower the return on investment & vice versa.

Both the IRR provided on this plan options are lower than any bank’s FD rate of Interest. These returns cannot combat the inflation rate in the long run. Any investment will only be beneficial for an investor if it generates returns that are above the inflation rate.

LIC Dhan Varsha Plan VS Other Investment Options

Now we have computed the return of LIC Dhan Varsha. Now it’s time to compare it with other investment options to assist you in taking the right decision.

Let us assume the cash flow similar to that of the second option under the LIC Dhan Varsha plan. The same single premium is invested in pure term insurance for life coverage (single pay) & the balance amount can be invested for wealth accumulation purposes.

LIC Dhan Varsha Vs. Pure Term Insurance + ELSS

The Assumption for Comparison:

Pure Term Policy:
Sum Assured on death	1 crore
Policy term	15 years
Premium (single pay)	1,40,000
Balance amount (Invested in ELSS)	6,58,700

LIC Dhan Varsha plan’s option 2 provides a death benefit 10 times the premium. Here in its substitute, a life cover for Rs. 1 crore for a policy term of 15 years has been opted for. 

The premium for the pure term insurance policy is Rs. 1,40,000 as a single-pay premium. The balance amount can be invested as per the policyholder’s risk appetite. Here the chosen investment vehicle is the ELSS fund. 

		Term insurance + ELSS
Age	Year	Term Insurance premium + ELSS	Death benefit
30	1	-7,98,700	1,00,00,000
31	2	0	1,00,00,000
32	3	0	1,00,00,000
33	4	0	1,00,00,000
34	5	0	1,00,00,000
35	6	0	1,00,00,000
36	7	0	1,00,00,000
37	8	0	1,00,00,000
38	9	0	1,00,00,000
39	10	0	1,00,00,000
40	11	0	1,00,00,000
41	12	0	1,00,00,000
42	13	0	1,00,00,000
43	14	0	1,00,00,000
44	15	0	1,00,00,000
45	16	33,20,764
	IRR	9.97%

The IRR for the pure term insurance + ELSS option is 9.97% which is a post-tax return. This return can combat inflation in the long run. 

Also, you will get a life cover for Rs. 1 crore by investing in this combination. It is evident from the investment point of view as well as from the life cover point of view that the LIC Dhan Varsha plan is not favorable to the investor as a long-term investment.

Final Verdict on LIC Dhan Varsha Plan

This new LIC Dhan Varsha Plan offers you guaranteed maturity benefits & life cover. But based on the plan options available, neither you can get higher coverage nor you can get a larger maturity benefit. 

In the end, you are forced to compromise with one to get the other benefit. Though these endowment policies will get you a guaranteed return, they will fail to provide you with the time value of your money.

To yield a better return, invest in a plan or scheme where it can combat inflation in the long run. Also, choose an investment vehicle based on your risk appetite & time horizon.

To know and understand better investment options, you can consult with your financial advisor to see which investment choice will be the right fit for your investment portfolio.