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Do you regularly set aside a part of your income to achieve your life aspiration?
Are these savings getting systematically invested to create wealth over time to meet of all financial targets?
You should also keep in mind the uncertainty in life. LIC has a gamut of endowment policies. LIC’s Jeevan Lakshya claims an opportunity to save as well as provide financial security with a life cover. Let us explore the features & opportunities of LIC Jeevan Lakshya.
Will this plan act as a saving tool & provide adequate life cover?
Let’s discover here!
Table of Contents:
1.) An Overview Of Lic Jeevan Lakshya
2.) Features Of Lic Jeevan Lakshya
3.) Eligibility Criteria Of Lic Jeevan Lakshya
4.) Benefits Of Lic Jeevan Lakshya
5.) Other Benefits Of Lic Jeevan Lakshya
6.) Grace Period, Revival, Paid-up Policy
7.) How To Cancel/surrender Lic Jeevan Lakshya
8.) Advantages Of Lic Jeevan Lakshya
9.) Disadvantages Of Lic Jeevan Lakshya
10.) Research Methodology On Lic Jeevan Lakshya
11.) Benefit Illustration Analysis On Lic Jeevan Lakshya
12.) Final Verdict On Lic Jeevan Lakshya
An overview of LIC Jeevan Lakshya:
LIC’s Jeevan Lakshya is a Non-linked, Participating, Individual, Life Assurance plan. It offers a combination of life protection and corpus savings.
In case of the unfortunate death of the Policyholder at any time before maturity, this plan provides an Annual Income benefit that may help to fulfil the primary needs of the family. It also provides a lump sum amount at the time of maturity irrespective of the survival of the Policyholder.
Features of LIC Jeevan Lakshya:
- Limited premium paying term & life cover throughout the policy term.
- The mode of premium can be chosen as per convenience.
- The policy shall continue to participate in profits up to the date of maturity, provided the policy is in force.
- Simple reversionary bonus & Additional bonus – As declared by the Life Insurance Corporation.
- The death benefit & Maturity benefit can be taken in instalments.
Eligibility criteria of LIC Jeevan Lakshya:
| a) Minimum Basic Sum Assured | 1,00,000 |
| b) Maximum Basic Sum Assured | No Limit |
| (The Basic Sum Assured shall be in multiples of 10,000/-) | |
| c) Policy Term | 13 to 25 years |
| d) Premium Paying Term | (Policy Term – 3) years |
| e) Minimum Age at entry | 18 years (last birthday) |
| f) Maximum Age at entry | 50 years (nearer birthday) |
| g) Maximum Maturity Age | 65 years (nearer birthday) |
| h) Premium payment mode | Yearly, Half-yearly, Quarterly or Monthly |
Benefits of LIC Jeevan Lakshya:
Death benefit:
On the death of the Life Assured during the policy term before the stipulated Date of Maturity, the benefits are payable at 2 stages. One is maturity benefit payable on the date of maturity & the other is annual income till the date of maturity.
The following death benefit is payable on maturity (maturity benefit)
- Sum Assured on death + Vested Simple reversionary bonus + Additional bonus if any.
Sum Assured on death will be the highest of the following
- 7 times of annualised premium or
- Sum of 110% of Basic Sum Assured or
- 105% of total premiums paid up to the date of death.
Meanwhile, the following shall be payable annually (Annual income benefit)
Annual Income Benefit equal to 10% of the Basic Sum Assured shall be payable from the policy anniversary coinciding with or following the date of death of Life Assured, till the policy matures.
Maturity Benefit:
On Life Assured surviving the policy term, the following is payable on maturity.
Sum Assured on maturity + Vested Simple reversionary bonus + Additional bonus if any.
Sum Assured on maturity = Basic Sum assured.
Other Benefits of LIC Jeevan Lakshya:
Option to take Death Benefit in instalments:
The lump sum amount payable in case of death of the Life Assured can be received in instalments over the chosen period of 5 or 10 or 15 years instead of a lump sum amount. This option shall not be applicable for the Annual Income Benefit payable on the death of the Life Assured.
Settlement Option (for Maturity Benefit):
Option to receive Maturity Benefit in instalments over the chosen period of 5 or 10 or 15 years instead of lumpsum amount under an in-force as well as paid-up policy. This option can be exercised by the Life Assured; for full or part of the lump sum amount payable as maturity benefits either in absolute value or in percentage terms.
Rider Benefits:
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: 512A212V01)
Policy Loan:
The loan can be availed under the policy provided at least two full years’ premiums have been paid.
Grace Period, Revival, Paid-up policy
Grace period:
A grace period of 30 days shall be allowed for payment of yearly or half-yearly or quarterly premiums and 15 days for monthly premiums from the date of the First unpaid premium.
Revival:
If premiums are not paid within the grace period, then the policy will lapse. A lapsed policy can be revived within a period of 5 consecutive years from the date of the first unpaid premium but before the end of the policy term.
Paid-up policy:
If less than two years’ premiums have been paid – any subsequent premium is not duly paid, all the benefits under the policy shall cease after the expiry of the grace period.
If at least two full years’ premiums have been paid – any subsequent premiums be not duly paid, the policy shall not be wholly void, but shall continue as a paid-up policy.
How to cancel/surrender LIC Jeevan Lakshya:
Free look period of LIC Jeevan Lakshya:
If the Policyholder is not satisfied with the “Terms and Conditions” of the policy can return within 15 days from the date of receipt of the policy bond stating the reasons for objections.
How to Surrender LIC Jeevan Lakshya after the Free look period?
The policy can be surrendered at any time provided two full years’ premiums have been paid. On surrender of the policy, the higher of the following shall be payable
Guaranteed Surrender Value or
Special Surrender Value
Guaranteed Surrender value = Total premiums paid (excluding extra premiums, taxes and premiums for riders, if opted for) multiplied by the Guaranteed Surrender Value.
Advantages of LIC Jeevan Lakshya:
- Premium paying frequency can be selected as per convenience.
- All the bonuses enhance the maturity benefit.
- Simple Reversionary Bonus and Final Additional Bonus shall be payable under the policy on the due date of maturity irrespective of survival of the Life Assured.
- A loan option is available.
- Option to receive the death benefit & maturity benefit in instalments
- Tax benefit as per sec 80 C & Sec 10 (10D).
- Rider options are available.
Disadvantages of LIC Jeevan Lakshya:
- The benefits are not guaranteed. The bonus declaration varies for each year.
- The Annual income benefit in case of death, will not suffice to cater for the needs of the family.
- The lock-in period is 2 years for the loan & surrendering the policy.
Research Methodology on LIC Jeevan Lakshya:
Till now we have seen some important factors that we need to know about LIC Jeevan Lakshya. But, still, it is not enough for us to decide whether we should buy this plan or not. So, now we are going to see the analysis of LIC Jeevan Lakshya and how much return it gives us in the worst-case scenario and the best-case scenario by using the LIC Jeevan Lakshya Online Calculator.
Later, we are going to use the same value on other investments to see how much return we can get from other investments.
Finally, we are going to see compared to other investments, whether LIC Jeevan Lakshya gives us a better return or not.
Benefit Illustration analysis on LIC Jeevan Lakshya:
By looking into the following benefit illustration, we can understand the working of the plan. Here, the policyholder is assumed to survive till the end of the policy term & receive the maturity benefit (guaranteed) along with the bonus (non-guaranteed).
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 they are no upper or lower limits.
|
At 4% p.a. |
At 8% p.a. |
||||
| Age | Year |
Annualised premium / Maturity benefitSWA |
Death benefit |
Annualised premium / Maturity benefit |
Death benefit |
|
31 |
1 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
|
32 |
2 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
| 33 |
3 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
| 34 | 4 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
| 35 | 5 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
|
36 |
6 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
| 37 | 7 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
|
38 |
8 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
| 39 | 9 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
|
40 |
10 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
| 41 | 11 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
|
42 |
12 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
| 43 | 13 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
|
44 |
14 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
| 45 | 15 |
-93,769 |
16,50,000 |
-93,769 |
16,50,000 |
|
46 |
16 |
0 |
16,50,000 |
0 |
16,50,000 |
| 47 | 17 |
0 |
16,50,000 |
0 |
16,50,000 |
|
48 |
18 |
0 |
16,50,000 |
0 |
16,50,000 |
|
18,66,000 |
25,09,500 |
||||
| IRR |
2.55% |
5.18% |
|||
The IRR for the policy with the assumed rate for non-guaranteed benefit @ 4% would be 2.55% which is similar to the Bank SB A/C rate. Even if the assumed rate is 8% the IRR would be 5.18% which is lower than the Bank FD rate.
Even after staying invested for a long time, the return on investment at these rates won’t help in achieving your or your family’s aspirations. These rates are not inflation-beating returns. Essentially, one should look for investment options that have the potential to give much higher returns to offset inflation.
LIC Jeevan Lakshya vs. Other Investments + Term Insurance:
Financial security against life uncertainty can be provided by a Pure term insurance policy. In order to beat inflation, regular savings & smart investment options need to be chosen. Invest in the asset class that suits your risk appetite & time horizon.
The annualised premium for the above illustration is Rs.93,769. This amount can be split & invested in term insurance for life cover & the balance for wealth accumulation. Here the assumed investment option for low-risk appetite is PPF & for others ELSS.
Pure term policy: – Sum Assured: Rs. 15 lakhs, Term: 15 years, Annual premium: Rs 6000.
Balance amount: – Rs 87,769 can be invested in PPF / ELSS.
|
Term Insurance + PPF |
Term insurance + ELSS |
||||
|
Age |
Year | Term Insurance premium + PPF | Death benefit | Term Insurance premium + ELSS |
Death benefit |
| 31 | 1 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 32 | 2 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 33 | 3 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 34 | 4 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 35 | 5 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 36 | 6 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 37 | 7 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 38 | 8 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 39 | 9 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 40 | 10 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 41 | 11 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 42 | 12 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 43 | 13 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 44 | 14 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 45 | 15 | -93,769 | 15,00,000 | -93,769 | 15,00,000 |
| 46 | 16 | 0 | 0 | ||
| 47 | 17 | 0 | 0 | ||
| 48 | 18 | 0 | 0 | ||
| 29,24,298 | 47,75,358 | ||||
| IRR | 6.52% | 10.78% | |||
LIC Jeevan Lakshya Vs. PPF Vs. ELSS
Regular saving & proper investment earns a better return. Here the PPF investment reaps 6.52% & the ELSS reap 10.78% (post-tax rate). Despite inflation, these investments help to attain your aspirations.
Life cover should be adequate so that the family can continue the same standard of life & also fulfil future goals. Always have adequate life cover & investment in the appropriate asset class to beat inflation in long run.
Final Verdict on LIC Jeevan Lakshya:
LIC Jeevan Lakshya is an endowment plan which provides both investment and insurance benefits. Since it is a participating policy, the bonus is not guaranteed. The returns are dependent on these bonus payouts.
So, the IRR works out in the range of 2.5% to 5%. Don’t stick to these investments for tax benefits. It won’t help you in funding your goals. LIC Jeevan Lakshya Plan neither provide adequate financial security to the family nor help in regular savings.
When choosing an investment, one should be aware of the risk & return. Have pure term insurance in place & start your investment journey. This will help to achieve your life aspiration without any compromise.
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