Setting your financial goals is one of the basic steps in financial planning. While planning for your financial goals, it is always wise to think about financial security in the form of insurance.
Some of the insurance policies in the market, provide financial security and at the same time aid you in achieving your goals. LIC’s Jeevan Labh is an insurance cum investment product.
Let’s dissect the Advantages(pros) and Disadvantages(cons) of LIC Jeevan Labh which will in turn provide you with clarity on whether LIC Jeevan Labh is a Good or Bad Product to Invest your money.
In this article, let us do a detailed analysis of whether this plan suits you.
Let’s get started!
Table of Contents
1.)An overview of LIC Jeevan Labh
2.)Features of LIC Jeevan Labh – Analysis
3.)Eligibility Criteria of LIC Jeevan Labh – Analysis with Illustration
4.)LIC Jeevan Labh – Review of Benefits in detail
5.)The Grace Period, Discontinuance and Revival of LIC Jeevan Labh
6.)Free Look Period of LIC Jeevan Labh
7.)Surrendering Jeevan Labh of LIC Jeevan Labh
8.)Advantages of LIC Jeevan Labh – Analysis
9.)Disadvantages of LIC Jeevan Labh – Analysis
10.)Research Methodology of LIC Jeevan Labh
- Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of LIC Jeevan Labh
11.)LIC Jeevan Labh vs. LIC Dhan Vriddhi Plan
12.)LIC Jeevan Labh vs. LIC Jeevan Akshay – VII
13.)LIC Jeevan Labh vs. Other Investment Products – Review Conclusion
14.)Final verdict on LIC Jeevan Labh – Good or Bad?
1. An overview of LIC Jeevan Labh
It is a Non-linked, Participating, Individual Life Insurance savings plan. The plan offers a combination of protection and savings features. It is an endowment period, where you need to pay for a limited period and get the Maturity Benefit at the end of the Policy Term. The plan offers both death and Maturity Benefits along with profit participation bonuses.
Please Click here to read the official brochure of LIC Jeevan Labh for more policy details.
2. Features of LIC Jeevan Labh – Analysis
- You get the benefit of a limited Premium Payment.
- The benefits include a Simple revisionary bonus and a Final Additional Bonus.
- The Policy Term varies according to the chosen premium paying term.
- The plan takes care of liquidity needs through a loan facility.
- Tax benefit as per Income Tax laws.
3. Eligibility Criteria of LIC Jeevan Labh – Analysis with Illustration
|Minimum Basic Sum Assured||2,00,000|
|Maximum Basic Sum Assured||No Limit (Multiples of 10,000)|
|Policy Term / Premium Paying Term||(16/10), (21,15), (25/16) years|
|Minimum Entry age||8 years|
|Maximum Entry age||59 years (nearer birthday) for a Policy Term of 16 years|
|54 years (nearer birthday) for a Policy Term of 21 years|
|50 years (nearer birthday) for a Policy Term of 25 years|
|Maximum Age at Maturity||75 years (nearest birthday)|
|Premium Payment Frequency||Yearly, Half-yearly, Quarterly, Monthly.|
4. LIC Jeevan Labh – Review of Benefits in detail
Death Benefits are paid out as the sum of ‘Sum Assured on Death’ plus Simple Reversionary Bonuses Plus Final Additional Bonus (if any).
Where The Sum Assured on Death is defined as the highest of
- 7 times of annual premium paid or
- The Basic Sum Assured.
- The Death Benefit will not be lower than 105% of the overall premium amount paid as of the date of death.
On maturity of the policy, the policyholder will receive the Sum Assured on Maturity as a lump sum, this is equivalent to the Basic Sum Assured plus vested Simple Reversionary Bonuses and, if applicable, the Final Additional Bonus.
LIC Jeevan Labh is a participating policy. The policyholder is entitled to receive a Simple Revisionary Bonus as declared by the corporation. The Final additional bonus is payable at the time of Maturity or Death.
5. The Grace Period, Discontinuance and Revival of LIC Jeevan Labh
A grace period of 30 days will be allowed for payment of yearly half-yearly or quarterly premiums and 15 days for monthly premiums.
If less than two years’ premium has been paid and any subsequent premium is not duly paid, all the benefits under the policy shall cease after the expiry of the grace period from the date of the first unpaid premium and nothing shall be payable.
If after at least two years’ premium have been paid and any subsequent premium is not duly paid, all the benefits under the policy shall not be wholly void but shall subsist as a paid-up policy.
Revive the policy within the revival period of five years from the date of the first unpaid premium or up to the date of maturity, whichever is earlier.
6. Free Look Period of LIC Jeevan Labh
If you are not satisfied with the “Terms and Conditions” of the policy, the policy may be returned within 15 days from the date of receipt of the policy.
7. Surrendering Jeevan Labh of LIC Jeevan Labh
The LIC Jeevan Labh policy can be surrendered at any time provided two full years’ premiums have been paid. On surrender of the policy, the corporation shall pay the surrender value equal to higher of Guaranteed Surrender Value or Special Surrender value.
8. Advantages of LIC Jeevan Labh – Analysis
- Premium Payment is for a limited period, but life cover throughout the Policy Term
- Option to receive the Maturity Benefit in installments under a settlement option.
- Rider can be added to the base policy.
- A simple revisionary bonus and a Final additional bonus will enhance your Maturity Benefit.
- Loan can be availed up to a maximum of 90% of surrender value.
- The Death Benefit can be received in installments over a chosen period of 5/10/15 years under the Settlement option.
9. Disadvantages of LIC Jeevan Labh – Analysis
- The Sum Assured is too low to meet the family’s needs in case of eventualities.
- The benefits are not guaranteed in LIC Jeevan Labh. The bonus declaration varies for each year.
- The lock-in period is 2 years for the loan and surrendering the policy.
- The Maturity Benefit at the end of the Policy Term will not be sufficient to meet your life goals.
10. Research Methodology of LIC Jeevan Labh
LIC Jeevan Labh is an endowment policy in which your benefits are built and payable at maturity. As long as you pay a premium, the bonus accrues. Let us assume a scenario and calculate the return on investment at the time of maturity. This will help you to decide about the suitability of the plan.
Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of LIC Jeevan Labh
A 30-year-old male buys the LIC Jeevan Labh for a Sum Assured of ₹ 2 Lakhs. The annualised premium is ₹ 9.134. The Premium Paying Term is 16 years and the Policy Term is 25 years. If he pays a premium for 16 years, then he receives the maturity at the end of 25 years. The maturity proceeds include a simple revisionary bonus and a Final additional bonus.
|Sum Assured||2 Lakhs|
|Policy Term||25 years|
|Premium paying term||16 years|
It is assumed that the Projected Investment Rate of Return that LIC will be able to earn throughout the term of the policy will be 4% p.a. or 8% p.a., as the case may be. The Projected Investment Rate of Return is not guaranteed and there are no upper or lower limits.
|At 4% p.a.||At 8% p.a.|
|Age||Year||Annualised premium / Maturity Benefit||Death Benefit||Annualised premium / Maturity Benefit||Death Benefit|
In the above illustration, the IRR(Internal Rate of Return i.e. Interest Rate) of LIC Jeevan Labh at 4% p.a. is calculated at 2.33% and the IRR at 8% p.a. is calculated at 5.28%.
The final maturity under the assumed rate 4% scenario is ₹ 2.20 Lakhs and the IRR is 2.33%. This rate is less than a bank savings account interest rate.
The final maturity under the assumed rate 8% scenario is ₹ 3.70 Lakhs and the IRR is 5.28%. This rate is less than a bank’s fixed deposit interest rate.
The above analysis clearly shows that the return on investment is lower than the inflation rate. The return on investment plays a major role in wealth accumulation, especially in the long run. LIC Jeevan Labh is a long-term investment but the maturity proceeds of LIC Jeevan Labh can’t aid you in fulfilling any of your goals.
The sum assured is also too low to meet the family’s basic needs in case of eventualities. Alternatively, you can opt for a Pure Term life insurance policy with adequate life cover.
11. LIC Jeevan Labh vs. LIC Dhan Vriddhi Plan
Please read the complete review of the LIC Dhan Vriddhi Plan Here. This plan promises to give financial support to the family if the life assured dies unexpectedly during the Policy Term. It also provides a Guaranteed Lump Sum amount for the ensured living life on the maturity date.
12. LIC Jeevan Labh vs. LIC Jeevan Akshay – VII
You can read the complete review of LIC Jeevan Akshay – VII Here. It is an Individual Immediate Annuity Plan that is Non-Linked and Non-Participating. In this Immediate Annuity plan, you can select an annuity type from 10 available alternatives for payment of a lump sum amount.
13. LIC Jeevan Labh vs. Other Investment Products – Review Conclusion
As we have discussed earlier, after comparing and analyzing LIC Jeevan Labh with other investment products it seems clear that Bank FDs are far better investment options compared to LIC Jeevan Labh.
14. Final verdict on LIC Jeevan Labh – Good or Bad?
LIC Jeevan Labh is a well-established insurance plan offered by LIC, providing a combination of life insurance coverage and savings benefits. It is suitable for individuals who want to inculcate the habit of savings.
LIC Jeevan Labh is a non-linked, limited Premium-paying endowment plan. It is a traditional insurance policy designed to provide financial protection to the policyholder and their family while also offering Savings Benefits.
Please don’t get misled by reading reviews of LIC Jeevan Labh on social media sites like Quora, Facebook, Twitter, etc. The return on investment is poor and the Sum Assured is low.
This detailed analysis shows that both insurance and investment are not beneficial to the investor. But why do insurance agents keep pushing you into these kind of plans? Simple reason, for the high agent commission that they get for selling these plans to you.
Alternatively, you can buy a Pure Term insurance plan where you get high coverage. For wealth accumulation, your choice of investment should be based on the risk appetite and Time Horizon. Please consult a professional financial planner for the best investment choice for your individual financial goals.