LIC Jeevan Umang: Review (2023) – Should You Buy It?

LIC Jeevan Umang is a savings and insurance plan that offers a combination of life protection and guaranteed income protection.

But how guaranteed are these incomes when it comes to securing your financial future?

Will this guaranteed income can help you to achieve your financial goals?

Let’s do a detailed analysis on LIC Jeevan Umang to discover the answer to these questions.

First, let’s understand the basic things that we need to know about LIC Jeevan Umang.

Table of Content:

1.) What is LIC Jeevan Umang?

2.) Features of LIC Jeevan Umang

3.) Benefits of LIC Jeevan Umang

4.) Eligibility of LIC Jeevan Umang

5.) Advantages of LIC Jeevan Umang

6.) Disadvantages of LIC Jeevan Umang

7.) Research Methodology

8.) Factors: LIC Jeevan Umang vs. Other Investments

9.) Final Verdict on LIC Jeevan Umang – Should you buy it?

What is LIC Jeevan Umang?

LIC Jeevan Umang claims to be ‘the 100-year plan’ that offers both life protection and guaranteed income.

It offers a survival benefit which is equal to 8% of the Basic Sum Assured from the completion of your Premium Payment Term till your age of 99 years. This plan also offers a maturity benefit as a lump sum when the policyholder reaches the age of 100.

Features of LIC Jeevan Umang:

1. It is a money-saving plan.
2. Survival benefit from the end of the premium payment term to the policyholder reaches the age of 99.
3. Maturity benefit will be paid as a lump sum when the policyholder reaches the age of 100.
4. Option to choose the premium payment term.
5. Since it is a participating policy it entitles policyholders to additional bonuses depending on the profits earned by LIC in a year.
6. Additional riders benefit.

Benefits of LIC Jeevan Umang:

1.) Death Benefit:

If the policyholder passes away unfortunately before starting to receive the benefit, then

• the premium will be refunded without any interest.

If the policyholder passes away after starting to receive benefits, then

• Sum Assured on Death plus Reversionary Bonus and Final Additional bonus shall be paid to the nominee of the policyholder. 

2.) Survival Benefit:

8% of the Basic Sum Assured will be paid every year as a Survival Benefit after the completion of the final premium payment term.

3.) Maturity Benefit: 

The Sum Assured on Maturity along with Reversionary Bonus and Final Additional Bonus will be paid to the policyholder during the maturity.

4.) Participation in Profit:

1.) During the premium paying term:

Policies that are still in effect during the premium-paying period are eligible to earn Simple Reversionary Bonuses that have been determined based on the Corporation’s experience.

In the year when a death claim is made on an active policy, a last additional bonus may also be reported under that policy.

2.) After the premium paying term: 

Depending on the Corporation’s experience under the LIC Jeevan Umang plan at the moment, the rules for participation of profits after the premium-paying term may take a different shape and be calculated on a different scale.

Future earnings would not be shared by a paid-up policy with a Maturity Paid-Up Sum Assured of less than Rs. 2 lacs.

Eligibility of LIC Jeevan Umang:

a) Minimum Basic Sum Assured	Rs. 2,00,000
b) Maximum Basic Sum Assured	No limit (The Basic Sum Assured shall be in multiples of Rs. 25,000/-)
c) Premium Paying Term	15, 20, 25 and 30 years
d) Policy Term	(100 – the age at entry) years
e) Minimum Age at entry	90 days (completed)
f) Maximum Age at entry	55 years(nearer birthday)
g) Minimum Age at the end of premium paying term	30 years(nearer birthday)
h) Maximum Age at the end of premium paying term	70 years(nearer birthday)
i) Age at maturity	100 years(nearer birthday)
j) Premium paying frequency	yearly, half-yearly, quarterly or monthly

Advantages of LIC Jeevan Umang:

You receive a lifetime of coverage because it is whole life insurance.

• A limited number of convenient premium paying terms are available.
• Loan option is available.
• Possibility of receiving death benefits in instalments.
• Riders are available at an extra fee.

Disadvantages of LIC Jeevan Umang:

• Lock-in period is two years (for surrender, paid-up or loan)
• The survival benefit is fixed. It doesn’t take inflation into account.
• The frequency to receive the survival benefit is fixed. Only an annual option is available.

Research Methodology:

How to discover whether LIC Jeevan Umang is suitable for you or not?

Here, let’s do detailed research on LIC Jeevan Umang and its performance against other investments based on various factors.

First, we are going to calculate the IRR of LIC Jeevan Umang for the worst-case scenario and the best-case scenario. 

Then, we are going to calculate the IRR of other risk-free and risk-oriented investment plans to see which performs better.

Later, we are going to see which gives you an advantage based on various factors such as affordability, charges, lock-in period and so on.

Factors: LIC Jeevan Umang vs. Other Investments

1.) IRR

IRR of LIC Jeevan Umang with an example:

For example, let’s take a policyholder who is 40 years old.

He chooses a single life plan.

Sum Assured = Rs. 1,00,00,000

Premium Payment Term = 20 years

Policy Term = 25 years

Life expectation = 85 years

Annual Premium = Rs. 5,40,307 include tax

Here let’s calculate the IRR of LIC Jeevan Umang for both the worst case scenario and the best case scenario by using LIC Jeevan Umang Calculator.

In the worst-case return, let’s take the Assumed Gross Return as 4%. 

		At 4% p.a
Age	Year	Annualised premium / Maturity benefit	Death Benefit
41	1	-5,40,307	1,00,00,000
42	2	-5,40,307	1,00,00,000
43	3	-5,40,307	1,00,00,000
…	…	…	…
60	20	-5,40,307	1,00,00,000
61	21	8,00,000	1,00,00,000
62	22	8,00,000	1,00,00,000
63	23	8,00,000	1,00,00,000
…	…	…	…
85	45	8,00,000	1,00,00,000
		1,08,57,840
IRR		4.08%

As you can see, at the end of the policy term, we get an IRR of 4.08% and Rs. 1,08,57,840 as survival benefits.

Now, let’s calculate the IRR for the best-case scenario.

Here we take the Assumed Gross Return as 8%.

		At 8% p.a
Age	Year	Annualised premium / Maturity benefit	Death Benefit
41	1	-5,40,307	1,00,00,000
42	2	-5,40,307	1,00,00,000
43	3	-5,40,307	1,00,00,000
…	…	…	…
60	20	-5,40,307	1,00,00,000
61	21	8,00,000	1,00,00,000
62	22	8,00,000	1,00,00,000
63	23	8,00,000	1,00,00,000
…	…	…	…
85	45	8,00,000	1,00,00,000
		5,03,15,000
IRR		6.25%

Here at the end of the policy term, we get an IRR of 6.25% and Rs. 5,03,15,000 as survival benefit.

Options	IRR	Maturity Benefit in Rs.	Death Benefit in Rs.
Worst Case Scenario (4% assumed gross return)	4.08%	1.08 cr	1 cr
Best Case Scenario (8% assumed gross return)	6.25%	5.03 crs	1 cr

IRR of LIC Jeevan Umang vs. Term Insurance + PPF + Hybrid Funds: 

Now, let’s calculate the IRR of a risk-free investment plan. For example, let’s take PPF.

Overall contribution: Rs. 5,40,307

Term Insurance:

Sum Assured: Rs. 1,00,00,000

Annual Term: Rs. 22,100

Tenure: 20 years

PPF Contribution: Rs. 5,18,207

(Note: The maximum investment amount in PPF is Rs. 1,50,000. We have used Rs. 5,18,207 for calculation purposes only.)

Interest Rate: 7.10% without investment risk

Then,

		Term Insurance + PPF
Age	Year	Term Insurance premium + PPF	Death Benefit
41	1	-5,40,307	1,00,00,000
42	2	-5,40,307	1,00,00,000
43	3	-5,40,307	1,00,00,000
…	…	…	…
60	20	-5,40,307	1,00,00,000
61	21	8,00,000	–
62	22	8,00,000	–
63	23	8,00,000	–
…	…	…	…
85	45	8,00,000	–
		8,91,64,129
IRR		7.37%

Here, after 20 years, your PPF will mature and will give you Rs. 2,30,02,476 as an investment return.

Now, here you can reinvest the money as a 70:30 ratio in debt and equity for the remaining 25 years and can withdraw Rs. 8,00,000 annually through a Systematic Withdrawal Plan.

Equity	30%	12%
Debt	70%	6%
Weighted Average return		7.80%

And at the end of the 45 years, you will get an IRR of 7.37% and Rs. 8,91,64,129 as investment return.

In this way, you can stay invested and can have a consistent income.

Options	IRR	Maturity Benefit in Rs.	Death Benefit in Rs.
Worst Case Scenario (4% assumed gross return)	4.08%	1.08 cr	1 cr
Best Case Scenario (8% assumed gross return)	6.25%	5.03 crs	1 cr
PPF	7.37%	8.91 crs	1 cr

IRR of LIC Jeevan Umang vs. Term Insurance + ELSS + Hybrid Funds:

Now, let’s calculate the IRR for risk-oriented investment. For example, let’s take ELSS.

Overall contribution: Rs. 5,40,307

Term Insurance:

Sum Assured: Rs. 1,00,00,000

Annual Term: Rs. 22,100

Tenure: 20 years

ELSS Contribution: Rs. 5,18,207

Assumed Rate of Return: 12% with investment risk

Then,

		Term Insurance + ELSS
Age	Year	Term Insurance premium + ELSS	Death Benefit
41	1	-5,40,307	1,00,00,000
42	2	-5,40,307	1,00,00,000
43	3	-5,40,307	1,00,00,000
…	…	…	…
60	20	-5,40,307	1,00,00,000
61	21	8,00,000	–
62	22	8,00,000	–
63	23	8,00,000	–
…	…	…	…
85	45	8,00,000	–
		19,16,90,379
IRR		9.07%

Here, if we invest the money as we did in PPF, we will get an IRR of 9.07% and Rs. 19,16,90,379 as post-tax investment return.

Options	IRR	Maturity Benefit in Rs.	Death Benefit in Rs.
Worst Case Scenario (4% assumed gross return)	4.08%	1.08 cr	1 cr
Best Case Scenario (8% assumed gross return)	6.25%	5.03 crs	1 cr
ELSS	9.07%	19 crs	1 cr

Here you may think, LIC Jeevan Umang gives a better return without taking any risk so why should I choose another investment?

You may think that Instead of following two or three investment steps, I can choose a single LIC Jeevan Umang policy.

Of course, you can but here is the catch.

You can get the same in a Bank FD or in RBI Bonds

Also, compared to PPF and ELSS, LIC Jeevan Umang did not add any special value to your money.

Please keep up with me to know more hidden factors.

2.) GST:

LIC Jeevan Umang: If you have noticed, when you pay the premium, you are also paying extra for the tax. 

So, in LIC Jeevan Umang, you are paying more than you should and getting nothing in return for the extra you are paying.

So, in the end, your assumed gross return will be less than 6%.

PPF & Mutual Fund: But, in PPF or Mutual Fund Investment, you don’t have to pay any additional taxes. 

Even in Mutual Funds, you will pay tax for your investment return, but the post-tax returns are better than the returns from Jeevan Umang.

And, finally, you don’t have to pay any tax for the interest you earn in PPF.

3.) Affordability:

LIC Jeevan Umang: Rs. 5000/month.

Mutual Fund & PPF: Rs. 500/month.

So, compare to LIC Jeevan Umang, everyone can afford to invest in Mutual Fund and PPF.

4.) Lock-in Period:

LIC Jeevan Umang: 2 years.

PPF: 15 years

Mutual Fund: Based on the plan chosen by the investor

5.) Liquidity option:

LIC Jeevan Umang: Partial withdrawal is not available. But, the policyholder can surrender the plan after 2 years or can avail of the loan.

PPF: Partial withdrawal is allowed after 5 years. An investor can also avail of the loan.

Mutual Fund: The liquidity option is available anytime.

6.) Regulatory Authority:

LIC Jeevan Umang: IRDA – Insurance Regulatory and Development Authority

Mutual Fund: SEBI – Securities and Exchange Board of India

Mutual Funds’ norms and fee structures are strictly regulated by SEBI. So, there won’t be any additional or hidden charges you need to pay for your investments.

PPF: DEA – Department of Economic Affairs (It is a Government Scheme)

7.) Charges:

LIC Jeevan Umang: The fee and charges are yet to be regulated by IRDA. So, there will be some hidden charges drawn by the insurance companies themselves. So, it is better to go through all the charges and fee structures before purchasing an insurance plan. Because these hidden charges can reduce your IRR.

PPF: There are no additional or hidden charges deducted in PPF.

Mutual Fund: The charges are regulated by SEBI. So, the charges are transparent.

8.) Tax Benefit:

The tax benefit is available to all.

9.) Inflation Beating Return:

LIC Jeevan Umang: We cannot say the value of your financial goal will not be the same as today. That’s why you need an inflation-beating return. And, as we can see in the example, LIC Jeevan Umang did not give us the inflation-beating return.

PPF: In PPF, we can get an investment return which is higher than LIC Jeevan Umang. But, still, it is a tax-saving investment plan with 15 year maturity period. So, still, it barely can help you to beat inflation.

Mutual Fund: Return on Mutual Fund can help you beat inflation in the long run compared to LIC Jeevan Umang and PPF.

10.) Goal-Based Investment Planning:

LIC Jeevan Umang: LIC Jeevan Umang is an insurance and savings plan. So, you can use this plan either for your retirement or for your children’s marriage only if it gives you an inflation-beating return.

PPF: As mentioned earlier PPF is tax saving plan with limited investment options. So, it cannot help you to plan your financial goal completely.

Mutual Fund: You can choose more than one mutual fund based on your financial goals. As per your financial goal, you can choose the investment scheme. You have control over how much you need to invest and how long to invest in mutual funds. Also you can take a break from investing for an year or so. You can also increase your contribution based on your increment in the income.

11.) Surrender or Cancel:

LIC Jeevan Umang:

The policyholder can cancel the policy during the free look period of 15 days from the date of policy purchased or have to wait 2 years to surrender the policy.

PPF: The investor can close the account prematurely.

Mutual Fund: An investor can withdraw or switch the plan at any time.

12.) Insurance coverage:

LIC Jeevan Umang: Compared to pure term insurance, LIC Jeevan Umang is expensive.

Pure Term Insurance: You can avail of pure term insurance with high coverage at a low cost.

Final Verdict on LIC Jeevan Umang – Should you buy it?

After analysing all the factors, compared to other investments, LIC Jeevan Umang is still at disadvantage in many ways. So, it is better to choose alternative investment plan that gives you an inflation-beating return.

As for life cover, you can choose pure term insurance at a low cost with high coverage.