Are you in the process of building a corpus for your kids that will support them as they pursue their future goals?
Are you putting a lot of effort into your work today with the hope of giving your kids a brighter tomorrow?
However, what steps should be taken to reap the rewards of your labor?
Investing is the most crucial element in protecting your kids’ future.
Just investing— is that enough?
The path ahead is to make the correct investments at the right time and place.
LIC Jeevan Tarun is a child education plan. Will this plan open the doors for your kids in the future? In this article, let us analyse the Advantages(pros) and Disadvantages(cons) of LIC Jeevan Tarun and find whether this LIC Jeevan Tarun is a Good or Bad option to trust your money with. Come let’s find out!
Table Of Contents
1.) What is LIC Jeevan Tarun?
2.) What are the Features of LIC Jeevan Tarun
3.) Who is eligible for LIC Jeevan Tarun?
4.) What are the Benefits of LIC Jeevan Tarun?
5.) The Grace period, Paid-up policy and Revival of LIC Jeevan Tarun – Analysis
6.) Free-Look Period of LIC Jeevan Tarun
7.) How to surrender the LIC Jeevan Tarun Policy?
8.) What are the advantages of LIC Jeevan Tarun?
9.) What are the disadvantages of LIC Jeevan Tarun?
10.) Research Methodology of LIC Jeevan Tarun
- Benefit Illustration – IRR(Internal Rate of Return) Analysis of LIC Jeevan Tarun
- LIC Jeevan Tarun Vs. ELSS / PPF
- LIC Jeevan Tarun vs SBI Life Insurance Child Plan – Smart Scholar
- LIC Jeevan Tarun vs ICICI Pru Smart Kid Solution
1.) What is LIC Jeevan Tarun?
LIC Jeevan Tarun is a non-linked participating individual life assurance savings plan, that combines saving and protection elements. This plan is specifically created to provide annual Survival Benefit payments from the age of 20 to 24 and Maturity Benefit at the age of 25 to fulfill the educational and other demands of developing youngsters.
Read the official Brochure of LIC Jeevan Tarun for more policy details.
2.) What are the Features of LIC Jeevan Tarun?
- There are four plan options in the plan.
- Premiums can be paid regularly in yearly, half-yearly, quarterly, or monthly modes.
- The policyholder can choose the proportion of Survival Benefits to be availed during the term of the policy.
- The policy offers life cover for the kid throughout the policy term.
- The plan can be purchased by any of the parents or grandparents for a child aged 0 to 12 years.
- Bonus enhances your Maturity Benefit.
3.) Who is eligible for LIC Jeevan Tarun?
|Minimum Age at Entry||90 days|
|Maximum Age at Entry||12 years|
|Minimum/ Maximum Maturity Age||25 years|
|Policy Term||25 years – Age at entry|
|Premium Paying Term||20 years – Age at entry|
|Minimum Basic Sum Assured||₹ 75,000|
|Maximum Basic Sum Assured||No Limit|
4.) What are the benefits of LIC Jeevan Tarun?
On death of the Life Assured during the LIC Jeevan Tarun policy term provided the policy is in force, the following Death Benefit is payable to the nominee
“Sum Assured on Death” along with vested Simple Reversionary Bonuses and Final Additional Bonus, if any, shall be payable. Where “Sum Assured on Death” is defined as Higher of
- Basic Sum Assured or
- 7 times of annualized premium
- This Death Benefit shall not be less than 105% of the total premiums paid up to the date of death.
A fixed percentage of the Sum Assured shall be payable on each LIC Jeevan Tarun policy anniversary coinciding with or immediately following the completion of 20 years of age and thereafter on each of the next four LIC Jeevan Tarun policy anniversaries.
|Survival Benefit (Age – 20 -24 years)||Survival Benefit (% of Sum Assured)|
|Option 2||5% each Year|
|Option 3||10% each year|
|Option 4||15% each year|
On Life Assured surviving the LIC Jeevan Tarun policy term, provided the policy is in force, “Sum Assured on Maturity” along with vested Simple Reversionary Bonuses and Final Additional Bonus, if any, shall be payable. Where Sum Assured on Maturity as a fixed percentage of Sum Assured for different options is given in the below illustration.
|Maturity Benefit (Age – 25 years)||Maturity Benefit (% of Sum Assured)|
Participation in Profits
The LIC Jeevan Tarun policy shall participate in the profits of the Corporation and shall be entitled to receive Simple Reversionary Bonuses declared as per the experience of the Corporation, provided the LIC Jeevan Tarun policy is in -force.
Final Additional Bonus may also be declared under the LIC Jeevan Tarun policy in the year when the policy results in a claim either by death or maturity.
5.) The Grace Period, Paid-up Policy and Revival of LIC Jeevan Tarun – Analysis
In LIC Jeevan Tarun, a Grace Period of 30 days shall be allowed for payment of yearly half-yearly, or quarterly premiums and 15 days for monthly premiums from the date of the first unpaid premium.
If less than two years’ premiums have been paid, and any subsequent premium is not duly paid, after the grace period from the date of the first unpaid premium expires, all benefits under the LIC Jeevan Tarun policy will end and no further payments will be made.
If after at least two full years’ premiums have been paid and any subsequent premiums are not duly paid, until the end of the policy term, the LIC Jeevan Tarun insurance will remain a paid-up policy and not be completely void.
A lapsed LIC Jeevan Tarun policy can be revived within a period of 5 consecutive years from the date of the first unpaid premium.
6.)Free-Look Period of LIC Jeevan Tarun
If the LIC Jeevan Tarun Policyholder is not satisfied with the “Terms and Conditions” of the policy, the LIC Jeevan Tarun policy may be returned to the Corporation within 15 days from the date of receipt of the LIC Jeevan Tarun policy bond stating the reasons of objections.
7.)How to Surrender the LIC Jeevan Tarun Policy?
The LIC Jeevan Tarun policy can be surrendered at any time provided two full years’ premiums have been paid. On surrender of the LIC Jeevan Tarun policy, the Corporation shall pay the Surrender Value equal to the higher Guaranteed Surrender Value or Special Surrender Value.
8.)What are the advantages of LIC Jeevan Tarun?
- The rider option enhances the cover.
- Option to receive Death Benefit in instalments over the chosen period of 5 or 10 or 15 years instead of a lump sum amount.
- Under the Settlement Option, you can receive Maturity Benefits in installments.
- A loan can be availed and the maximum loan amount is 90% of the surrender value.
- Rebate for High Sum assured.
9.)What are the disadvantages of LIC Jeevan Tarun?
- There might be a mismatch between the Survival Benefit and the actual requirement.
- The Maturity Benefit is receivable only at a specified age i.e., 25 years.
- The Survival Benefits can’t be deferred.
- Life cover is offered for the child and not for the parent. Generally, all child plans offer life cover for parents.
- High Agent Commission will diminish the overall returns.
10.)Research Methodology of LIC Jeevan Tarun
Next, we are moving on to the most important aspect, return on investment. The measure of all the cash flow received over the life of an investment, expressed as an annual percentage (%) is known as the Internal Rate of Return (IRR). IRR calculations are simple and help an investor decide whether to take or skip an investment opportunity. We shall take a quote from the LIC Portal and calculate the IRR.
Benefit Illustration – IRR(Internal Rate of Return) Analysis of LIC Jeevan Tarun
A parent of a 5-year-old child opts for LIC Jeevan Tarun. The sum assured is ₹ 5 Lakhs. The policy term is 20 years and the premium paying term is 15 years. The annualised premium is ₹ 27,851. He chooses plan option 1.
|Sum Assured||5 Lakhs|
|Policy term||20 years|
|Premium paying term||15 years|
Under plan option 1, there is no Survival Benefit. At the age of 25 years, the Maturity Benefit along with a bonus is available. The illustration will show two different rates of assumed future investment returns, of 8% p.a. and 4% p.a.
These expected rates of return do not represent upper or lower limits on the amount you could receive back. They are merely estimates based on various factors, including future investment performance, which will determine the value of your LIC Jeevan Tarun Policy.
|Age||Year||At 4% p.a.||At 8% p.a.|
|Annualised premium / Maturity Benefit||Death Benefit||Annualised premium / Maturity Benefit||Death Benefit|
In the above illustration, at 4% Scenario, the final maturity value is ₹ 5.5 Lakhs and the IRR calculation results in 2.11%. At 8% Scenario, the final maturity value is ₹ 8.32 Lakhs and the IRR calculation results in 5.25%. Both these returns are not beneficial for a long-term investor. The IRR is less than the inflation rate.
Under plan option 1, even though there is no Survival Benefit and all the benefits are due at maturity, the IRR is low. If you opt for Survival Benefit, then the IRR will be even lower for those plan options.
11.) LIC Jeevan Tarun vs Other Investment Options
LIC Jeevan Tarun offers life cover for the child and other benefits to meet the financial needs. In general, a life cover is available for an individual who is 18 years or above. Life cover for a kid is unnecessary. Now, let us evaluate the performance of other investments if we invest the same premium of LIC Jeevan Tarun.
i)LIC Jeevan Tarun Vs. ELSS / PPF
The annualised premium of ₹ 27,851 can be invested either in a debt instrument or equity instrument as per your risk appetite. Here, we have chosen the ELSS fund (equity) and PPF account (debt). Over the first 15 years, the premium is invested in these investments. And in the last 5 years, the fund has grown.
The PPF account matures after 15 years and it could be extended for another 5 years. The final maturity value under the PPF account is available to you at the end of 20 years.
Under ELSS investment, the premium is invested in the find for the first 15 years. And in the last 5 years, the fund has grown. While exiting the fund at the end of 20 years, capital gains tax is payable. Tax calculation is given below.
|Age||Year||Term Insurance + PPF||Term insurance + ELSS|
|Term Insurance premium + PPF||Death Benefit||Term Insurance premium + ELSS||Death Benefit|
In the above illustration, the final Maturity Value under the PPF account is ₹ 10.64 Lakhs. The IRR under this scenario is 7.10%. The Pre-Tax Value under the ELSS fund is 20.49 Lakhs. After capital gains tax payment, the final maturity value available is ₹ 18.96 Lakhs. The IRR under the scenario is 11.42% (Post-Tax Return).
From this analysis, it is evident that investing in a Child Insurance plan will not be helpful to cope with the inflation. Saving through LIC Jeevan Taun will leave you in a deficit when the goal is due. So, investing in a diversified portfolio based on your personal risk appetite is the right way to tackle inflation in the long run.
|ELSS Tax Calculation|
|Maturity Value after 20 years||20,49,375|
|Long-term capital gains||16,31,610|
|Tax paid on LTCG||1,53,161|
|Maturity value after tax||18,96,214|
ii)LIC Jeevan Tarun vs SBI Life Insurance Child Plan – Smart Scholar
Let’s look at some of the advantages of the SBI Life Insurance Child Plan – Smart Scholar,
- There are nine distinct fund alternatives available.
- Loyalty Addition helps to increase the value of your fund.
- The policy’s built-in benefits (rider) include accident benefits and premium payor waiver benefits.
You can read the review of the SBI Life Insurance Child Plan – Smart Scholar for more interesting details and analysis of the Good and bad aspects.
iii)LIC Jeevan Tarun vs ICICI Pru Smart Kid Solution
Let’s look at some of the advantages of the ICICI Pru Smart Kid Solution,
- Throughout the policy term, fund changes and premium redirections are possible.
- As long as the five policy years are completed, partial withdrawals are permitted to address emergencies.
- An inherent benefit is the opportunity to forgo the payment.
You can read the review of the ICICI Pru Smart Kid Solution for more interesting details and an analysis of the Advantages(pros) and Disadvantages(cons) of the plan.
12.) LIC Jeevan Tarun vs Other Investment Options – Review Conclusion
We have already demonstrated through the IRR analysis that the investment return provided by LIC Jeevan Tarun is insignificant when companalysis of the Advantages(pros) and Disadvantages(cons) of the plan.ared to the sizeable corpus required for your children. Even after comparing this to every other investment opportunity, it remains true.
13.)Final verdict on LIC Jeevan Tarun – Good or Bad Investment Option
LIC Jeevan Tarun plan provides life insurance and an opportunity to grow your investments to secure your child’s financial future. You have four options to meet your financial requirements. You can choose the plan option based on your need.
The flexibility in receiving the Survival Benefit is the only advantage of the plan. Otherwise, this is a simple money-back policy.
In the personal finance context, life cover is necessary only if the individual has dependent or other liabilities. So, in this context, life cover for a kid is unnecessary. The insurance component under LIC Jeevan Tarun is counterproductive.
The return on investment is also poor for a long-term investment. A diversified investment portfolio will aid you in achieving the goal. Do not rely on these ready-made child plans. Investing in ready-made child plans will derail your financial plans.
To build your wealth, consult a financial planner instead of searching for financial advice on social media platforms like Facebook, Twitter, Quora, etc. A certified Financial Planner will ensure that your plan is on the right track throughout your investment journey.