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LIC Jeevan Shiromani is a traditional money-back plan that offers a combination of life protection, savings, attractive returns, and medical cover.
Though it seems to offer many things, we need to find out whether it is suitable for your financial goals or not.
So, in this article, we are going to do in-depth research on LIC Jeevan Shiromani’s plan to see whether it is worth purchasing this plan or not.
Let’s begin.
Table of Content:
1.) What is LIC Jeevan Shiromani Plan?
2.) Features of LIC Jeevan Shiromani Plan
3.) Eligibility of LIC Jeevan Shiromani
4.) Benefits of LIC Jeevan Shiromani Plan
5.) How to cancel your LIC Jeevan Shiromani?
6.) Advantages of LIC Jeevan Shiromani
7.) Disadvantages of LIC Jeevan Shiromani
9.) Analysis of LIC Jeevan Shiromani
10.) Short analysis on LIC Jeevan Shiromani vs. PPF vs. ELSS
11.) LIC Jeevan Shiromani: Good or Bad?
What is LIC Jeevan Shiromani Plan?
LIC Jeevan Shiromani is a traditional money savings plan for high-net-worth individuals.
The LIC Jeevan Shiromani plan offers:
- Life protection to the policyholder in case of unfortunate death of a policyholder
- Maturity benefit
- 10% of Basic Sum Assured as Medical Coverage on a specific illness, and
- Loan Facility.
But, since this plan is aimed at high-net-worth customers, will this plan be worth the money?
Now, let’s see the features of the LIC Jeevan Shiromani Plan.
Features of LIC Jeevan Shiromani Plan:
- LIC Jeevan Shiromani is a traditional money-back plan with life coverage.
- This plan is designated for HNIs (High Networth Individuals).
- It offers periodical payment on survival.
- It provides a lump sum payment on maturity.
- It gives a 10% of medical coverage on specific illnesses from Basic Sum Assured.
Eligibility of LIC Jeevan Shiromani:
| Minimum Basic Sum Assured | Rs. 1,00,00,000 |
| Maximum Basic Sum Assured | No limit |
| Policy Term | 14, 16, 18 and 20 years |
| Premium Paying Term | (Policy term – 4) years |
| Minimum Age at entry | 18 years (completed) |
| Maximum Age at entry | 55 years (nearer birthday) for policy term 14 years |
| 51 years (nearer birthday) for policy term 16 years | |
| 48 years (nearer birthday) for policy term 18 years | |
| 45 years (nearest birthday) for policy term 20 years | |
| Maximum Age at Maturity | 69 years (nearer birthday) for policy term 14 years |
| 67 years (nearer birthday) for policy term 16 years | |
| 66 years (nearer birthday) for policy term 18 years | |
| 65 years (nearer birthday) for policy term 20 years | |
| Premium paying frequency | yearly, half-yearly, quarterly or monthly |
Benefits of LIC Jeevan Shiromani Plan:
Death Benefit:
If the policyholder passes away during the first five years, then
Sum Assured on Death and Guaranteed Addition shall be paid to the nominee of the policyholder.
If the policyholder passes away after five years, then Guaranteed Additions plus Loyalty Additions along with the Basic Sum Assured shall be payable.
Basic Sum Assured will be the highest of the following
- 125% of Basic Sum Assured or
- 7 times of annualised premium or
- 105% of all the premiums paid up to the date of death.
Survival benefit:
On the survival of the specific duration of the policy term, then a certain percentage of Basic Sum Assured shall be paid as a Survival Benefit.
| For policy term 14 years | 30% of Basic Sum Assured on each of the 10 and 12 policy anniversaries. |
| For policy term 16 years | 35% of Basic Sum Assured on each of the 12 and 14 policy anniversaries. |
| For policy term 18 years | 40% of Basic Sum Assured on each of the 14 and 16 policy anniversaries. |
| For policy term 20 years | 45% of Basic Sum Assured on each of the 16 and 18 policy anniversaries. |
Maturity benefit:
If the policyholder survives throughout the policy term, then Sum Assured on Maturity along with Guaranteed Addition and Loyalty Addition shall be payable to the policyholder.
40% of Basic Sum Assured for policy term 14 years
30% of Basic Sum Assured for policy term 16 years
20% of Basic Sum assured for policy term 18 years
10% of Basic Sum assured for policy term 20 years
Inbuilt Critical Illness:
The LIC Jeevan Shiromani offers medical cover on the first diagnosis of any of the 15 diseases listed in the policy. 10% of the basic sum assured shall be payable as medical coverage.
How to cancel your LIC Jeevan Shiromani?
Free look Period:
If the policyholder is not satisfied with the terms and conditions of the policy term, then he can cancel the policy within 15 days from the policy purchased.
However, the premium paid will be refunded after deducting the charges.
After the free look period:
The policy can be surrendered any time after the completion of the first policy term.
Advantages of LIC Jeevan Shiromani:
- The lock-in period (for Paid-up, Surrender, and Loan) is only one year.
- Inbuilt critical illness insurance and the option of various riders.
- Depending on your needs, you may choose a premium payment method.
- Guaranteed Addition throughout the policy term.
- Possibility of delaying the survival advantage.
- The choice of receiving the death benefit in instalments
- Option for settlement of maturity benefit
Disadvantages of LIC Jeevan Shiromani:
- The loyalty bonus is not certain.
- Given that the minimum sum insured is 1 crore, this is not suitable for retail investors.
Research Methodology:
Now we have seen all the necessary details that we need to know about LIC Jeevan Shiromani. But it is not enough to decide whether we should buy this plan or not. So, now let’s do a detailed analysis.
First, you are going to discover the IRR of LIC Jeevan Shiromani for the best case scenario and the worst case scenario.
Then we are going to find out the IRR of other risk-free and risk-oriented investments to discover which gives the better investment return.
Later, we are going to compare the factors such as affordability, tax benefit, long-term performance, and tax benefit for all the investment options to see which will be the better investment option for you.
Analysis of LIC Jeevan Shiromani:
IRR of LIC Jeevan Shiromani with Example:
Let’s calculate the IRR of LIC Jeevan Shiromani for the worst case scenario and the best case scenario by using the online calculator provided by LIC.
| Age of life Assure (Nearer Birthday) | 30 years |
| Policy Term (years) | 20 years |
| Premium Paying Term (Years) | 16 years |
| Premium Paying mode | yearly |
| Basic Sum Assured | ₹1,00,00,000 |
| Premium(Excluding Taxes) | ₹6,93,350 |
Here, let’s take the Assumed Gross Return as 4% in the worst-case scenario.
Then,
| At 4% p.a | ||||
| Age | Year | Annualised premium/Maturity benefit | Death Benefit | Crtical illness Benefit |
| 31 | 1 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 32 | 2 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 33 | 3 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| … | … | … | … | … |
| 46 | 16 | -6,93,350 | 2,05,00,000 | 10,00,000 |
| 47 | 17 | 45,00,000 | 2,10,00,000 | 10,00,000 |
| 48 | 18 | 0 | 2,10,00,000 | 10,00,000 |
| 49 | 19 | 45,00,000 | 2,10,00,000 | 10,00,000 |
| 50 | 20 | 0 | 2,10,00,000 | 10,00,000 |
| 95,50,000 | ||||
| IRR | 4.59% | |||
As you can see in the above illusion, after 20 years, we get an IRR of 4.59% in the worst-case scenario and Rs. 95,50,000 as a maturity benefit.
Now, let’s calculate the IRR of LIC Jeevan Shiromani for the best-case scenario.
Here, let’s take the Assumed Gross Return as 8% in the best-case scenario.
Then,
| At 8% p.a | ||||
| Age | Year | Annualised premium/Maturity benefit | Death Benefit | Crtical illness Benefit |
| 31 | 1 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 32 | 2 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 33 | 3 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| … | … | … | … | … |
| 46 | 16 | -6,93,350 | 2,24,00,000 | 10,00,000 |
| 47 | 17 | 45,00,000 | 2,33,50,000 | 10,00,000 |
| 48 | 18 | 0 | 2,33,50,000 | 10,00,000 |
| 49 | 19 | 45,00,000 | 24,15,000 | 10,00,000 |
| 50 | 20 | 0 | 2,49,50,000 | 10,00,000 |
| 1,34,50,000 | ||||
| IRR | 6.13% | |||
As you can see in the above illustration, after 20 years, we will get an IRR of 6.13% and Rs. 1,34,50,000 as maturity benefit.
| Options | IRR | Maturity Benefit in Rs. | Death Benefit in Rs. | Critical Illness Benefit in Rs. |
| Worst Case Scenario (4% assumed gross return) | 4.59% | 95.5 lacs | 2.10 crs | 10 lacs |
| Best Case Scenario (8% assumed gross return) | 6.13% | 1.34 cr | 2.49 crs | 10 lacs |
What’s the catch?
Here if you think, it is enough for you then, you must think about the GST you are going to pay along with your premium. So, the value will be lesser than what was mentioned earlier. Also, here, you have to think about the value of the money, the value of your financial goals will not be the same as today after 20 years. So, here you must think about whether the payment is enough to fulfil your financial goals after 20 years or not.
Now let’s calculate the IRR of other investments and see which performs better.
LIC Jeevan Shiromani vs. PPF + Term Insurance:
Overall contribution: Rs. 6,93,350
Term Insurance:
Sum Assured: Rs. 1,00,00,000
Critical Illness Benefit: Rs. 10,00,000
Annual Term: Rs. 16,000
Tenure: 20 years
PPF Contribution: Rs. 6,77,350
(Note: The maximum investment amount in PPF is Rs. 1,50,000 per annum. We have used Rs. 6,77,350 for calculation purposes only. If you have multiple family members in your family, then you can open a PPF account for them individually.)
Interest Rate: 7.10% without investment risk
Then,
| Term Insurance + PPF | ||||
| Age | Year | Term Insurance premium + PPF | Death Benefit | Crtical illness Benefit |
| 31 | 1 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 32 | 2 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 33 | 3 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 34 | 4 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 35 | 5 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 36 | 6 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 37 | 7 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 38 | 8 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 39 | 9 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 40 | 10 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 41 | 11 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 42 | 12 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 43 | 13 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 44 | 14 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 45 | 15 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 46 | 16 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 47 | 17 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 48 | 18 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 49 | 19 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 50 | 20 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 3,00,66,610 | ||||
| IRR | 6.90% | |||
As you can see, after 20 years, we get Rs. 3,00,66,610 as investment return and an IRR of 6.90% without taking any investment risk.
| Options | IRR | Maturity Benefit in Rs. | Death Benefit in Rs. | Critical Illness Benefit in Rs. |
| Worst Case Scenario (4% assumed gross return) | 4.59% | 95.5 lacs | 2.10 crs | 10 lacs |
| Best Case Scenario (8% assumed gross return) | 6.13% | 1.34 cr | 2.49 crs | 10 lacs |
| PPF | 6.90% | 3 crs | 1 cr | 10 lacs |
LIC Jeevan Shiromani vs. ELSS + Term Insurance:
Overall contribution: Rs. 6,93,350
Term Insurance:
Sum Assured: Rs. 1,00,00,000
Critical Illness Benefit: Rs. 10,00,000
Annual Term: Rs. 16,000
Tenure: 20 years
ELSS Contribution: Rs. 6,77,350
Assumed Rate of Return: 12% with investment risk
Then,
| Term Insurance + ELSS | ||||
| Age | Year | Term Insurance premium + ELSS | Death Benefit | Crtical illness Benefit |
| 31 | 1 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 32 | 2 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 33 | 3 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 34 | 4 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 35 | 5 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 36 | 6 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 37 | 7 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 38 | 8 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 39 | 9 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 40 | 10 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 41 | 11 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 42 | 12 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 43 | 13 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 44 | 14 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 45 | 15 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 46 | 16 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 47 | 17 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 48 | 18 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 49 | 19 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 50 | 20 | -6,93,350 | 1,00,00,000 | 10,00,000 |
| 5,05,59,860 | ||||
| IRR | 11.19% | |||
Here, after 20 years, we get an IRR of 11.19% in ELSS and Rs. 5,05,59,860 as a post-tax return.
| Options | IRR | Maturity Benefit in Rs. | Death Benefit in Rs. | Critical Illness Benefit in Rs. |
| Worst Case Scenario (4% assumed gross return) | 4.59% | 95.5 lacs | 2.10 crs | 10 lacs |
| Best Case Scenario (8% assumed gross return) | 6.13% | 1.34 cr | 2.49 crs | 10 lacs |
| ELSS | 11.19% | 5.05 crs | 1 cr | 10 lacs |
Short analysis on LIC Jeevan Shiromani vs. PPF vs. ELSS:
| Options | LIC | PPF | ELSS |
| Lock-in period | 1 year | 15 years | – |
| Min. Investment in Rs. | 5000/m | 500/m | 500/m |
| Rate of Return | 4-6% | 7.10% | 12% |
| Investment Risk | – | – | Yes |
| Section 80C benefit | Available | Available | Available |
| Taxability on return | Tax-Free | Tax-Free | Taxable |
| Liquidity | Can avail loan option | Can avail loan option | Anytime available |
| Withdrawal/Partial withdrawal | No | Can use partial withdrawal after 5 years | Can withdraw anytime after 3 years |
| Surrender/Cancelling the policy | Possible after 1 year | Can close prematurely | Can be closed anytime after 3 years. |
Which one gives you a better return in the long term?
After our detailed analysis, ELSS gives us a better return compared to LIC Jeevan Shiromani Plan.
If you don’t want to take any investment risk then, PPF gives you a second-best return compared to LIC Jeevan Shiromani.
Also, compared to LIC Jeevan Shiromani, ELSS is affordable to all because the minimum investment amount is Rs. 500 and can be withdrawn anytime.
Which investment gives you an inflation-beating return?
Again ELSS gives you inflation-beating return for a long time and gives you additional purchasing power against your financial goal.
The value of your financial goals will not be the same after 20 years, in that case, ELSS gives you purchasing power along with additional corpus.
Which investment is more goal focused?
Once again, the answer is ELSS. It can be your goal-focus investment option compared to LIC Jeevan Shiromani and PPF.
You may have various financial goals such as your children’s education, their marriage, and your retirement.
They will not happen at the same time. So, LIC Jeevan Shiromani cannot help you to achieve every one of them.
But, you can plan your investments in Mutual Fund based on all your financial goals.
LIC Jeevan Shiromani: Good or Bad?
Unlike other insurance plans, LIC Jeevan Shiromani offers medical benefits for certain conditions. Though it seems an attractive benefit, after our detailed research, we can see that it is just only attractive and not profitable.
Either for life cover or investment purposes, it is not advisable to choose LIC Jeevan Shiromani for your financial life.
So, if you want a better investment return, then you can choose PPF, Mutual Funds, and RBI Bonds.
If you want life coverage and medical coverage, then you can choose pure term insurance for high coverage at a low cost.
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