LIC New Endowment Plan (Plan no.914): An Insightful Review

Insurance is a safety net during difficult times. Without insurance, you may find it hard to manage financially. On the other hand, fulfilling the family’s dream will also be a question mark. The financial assistance helps you to recover faster.

LIC’s new Endowment plan offers both insurance protection and investment opportunity. Will this plan act as a safety net?

In this article let us look in detail at the Advantages(pros) and Disadvantages(cons) of the LIC New Endowment plan and check whether the LIC New Endowment Plan is a Good or Bad option for your savings and protection.

Table of Contents

1.)An Overview of LIC New Endowment Plan
2.)Features of LIC New Endowment Plan – Analysis
3.)Who is Eligible for the LIC New Endowment Plan?
4.)What are the Benefits of LIC’s New Endowment Plan? Review in Detail
5.)Grace Period, Discontinuance and Revival of LIC New Endowment Plan – Analysis
6.)Advantages of LIC New Endowment Plan – Analysis
7.)Disadvantages of LIC New Endowment Plan – Analysis
8.)Research Methodology of LIC New Endowment Plan

• Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of LIC New Endowment Plan

9.)LIC New Endowment Plan vs Other Investments Options

• LIC New Endowment Policy Vs. Pure Term Insurance Policy + PPF / ELSS
• LIC New Endowment Policy Vs. LIC Jeevan Lakshya
• LIC New Endowment Policy Vs. LIC Jeevan Labh

10.)LIC New Endowment Policy Vs. Other Investment Options – Review Conclusion
11.)Final Verdict on LIC New Endowment Plan – Good or Bad?

1. An Overview of LIC New Endowment Plan

The New Endowment Plan from LIC is an appealing blend of saving and protection. It is a non-linked, participating, individual life assurance plan. The surviving policyholders receive a sizable lump sum payment at maturity as well as financial help for the deceased’s family at any point before maturity.

You can Click Here to download the official brochure of the LIC New Endowment Plan.

2. Features of LIC New Endowment Plan – Analysis

• Policy terms range from 12 to 35 years.
• Premiums can be paid regularly in yearly, half-yearly, quarterly, or monthly mode.
• Maturity Benefit includes Simple revisionary bonuses and additional bonuses.

3. Who is Eligible for the LIC New Endowment Plan?

Minimum Basic Sum Assured	1,00,000
Maximum Basic Sum Assured	No Limit
Minimum Age at Entry	8 years (completed)
Maximum Age at Entry	55 years
Maximum Maturity Age	75 years
Minimum Policy Term	12 years
Maximum Policy Term	35 years

4. What are the Benefits of LIC’s New Endowment Plan? Review in Detail

Death Benefit – Review

Death Benefit payable in case of death of the Life assured during the LIC New Endowment policy term provided the policy is in force shall be “Sum Assured on Death” along with vested Simple Reversionary Bonuses and Final Additional bonus, if any. Where “Sum Assured on Death” is defined as a higher of

• Basic Sum Assured or
• 7 times of annualized premium.

This Death Benefit shall not be less than 105% of total premiums paid up to the date of death.

Maturity Benefit – Review

On Life Assured surviving the LIC New Endowment 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” is equal to Basic Sum Assured.

Profits / Bonus – Review

The LIC New Endowment 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 policy is in force.

The final (Additional) Bonus may also be declared under the LIC New Endowment policy in the year when the policy results in a claim either by death or maturity. Final Additional Bonus shall not be payable under paid-up policies.

5. Grace Period, Discontinuance and Revival of LIC New Endowment Plan – Analysis

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 is available in LIC New Endowment Plan.

Discontinuance

If less than two years’ premiums have been paid, and any subsequent premium is not duly paid, all the benefits under this LIC New Endowment 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 full years’ premiums have been paid and any subsequent premiums are not duly paid, this policy shall not be wholly void but shall subsist as a paid-up policy till the end of the LIC New Endowment policy term.

Revival

A lapsed LIC New Endowment policy can be revived within a period of 5 consecutive years from the date of the first unpaid premium and before the date of maturity, as the case may be.

6. Advantages of LIC New Endowment Plan – Analysis

• Five additional riders are available.
• Option to take the Death Benefit in installments.
• A loan option is available.

7. Disadvantages of LIC New Endowment Plan – Analysis

• The Maturity Benefit will not suffice to meet any goals.
• The return on investment is low.

8. Research Methodology of LIC New Endowment Plan

So far, we discussed the plan’s features, maturity, and Death Benefits. In order to check the suitability of the plan, let us calculate the Internal Rate of Return (IRR). LIC New Endowment Plan’s IRR can be compared with other investment returns. Based on this, we can make informed decisions.

Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of LIC New Endowment Plan

A 36-year-old male buys a LIC New Endowment Plan for a Sum Assured of Rs 25 Lakhs. The policy term and the premium paying term are 15 years. The annualised premium is 1,69,145.

Male	36 Years
Policy Term	15 years
Premium Paying Term	15 years
Sum Assured	25 Lakhs
Annualised Premium	1,69,145

If he pays the premium regularly, then at the end of 15 years, he would be receiving the Maturity Benefit along with a bonus. The assumed future investment returns are 8% p.a. and 4% p.a. These assumed rates of return are not guaranteed and they are not the upper or lower limits of what you might get back, as the value of your policy is dependent on several factors including future investment performance.

		At 4% p.a.		At 8% p.a.
Age	Year	Annualised premium / Maturity Benefit	Death Benefit	Annualised premium / Maturity Benefit	Death Benefit
36	1	-1,69,145	25,00,000	-1,69,145	25,00,000
37	2	-1,69,145	25,00,000	-1,69,145	25,00,000
38	3	-1,69,145	25,00,000	-1,69,145	25,00,000
39	4	-1,69,145	25,00,000	-1,69,145	25,00,000
40	5	-1,69,145	25,00,000	-1,69,145	25,00,000
41	6	-1,69,145	25,00,000	-1,69,145	25,00,000
42	7	-1,69,145	25,00,000	-1,69,145	25,00,000
43	8	-1,69,145	25,00,000	-1,69,145	25,00,000
44	9	-1,69,145	25,00,000	-1,69,145	25,00,000
45	10	-1,69,145	25,00,000	-1,69,145	25,00,000
46	11	-1,69,145	25,00,000	-1,69,145	25,00,000
47	12	-1,69,145	25,00,000	-1,69,145	25,00,000
48	13	-1,69,145	25,00,000	-1,69,145	25,00,000
49	14	-1,69,145	25,00,000	-1,69,145	25,00,000
50	15	-1,69,145	25,00,000	-1,69,145	25,00,000
51		29,68,750	25,00,000	35,25,000	25,00,000
	IRR	1.94%		4.01%

The final maturity value under the 4% scenario is ₹ 29.68 Lakhs as calculated in the above illustration. The IRR is resulting in 1.94% in the above illustration. Even a bank savings bank account earns better interest than the LIC endowment Policy.

The final maturity value under the 8% scenario is ₹ 35.25 Lakhs as calculated in the above illustration. The IRR works out to be 4.01%. Even a bank Fixed deposit earns better interest than LIC Endowment Policy.

LIC New endowment plan earns low interest but the investment period is longer. In the long run, LIC New Endowment can’t combat inflation.

9. LIC New Endowment Plan vs Other Investments Options

Any investment plan should benefit the investor in the long run. Now, let us look for better investment options. The idea behind this analysis is to figure out the returns of alternate investments. And then compare the returns of LIC New Endowment Policy with other alternate investments.

i) LIC New Endowment Policy Vs. Pure Term Insurance Policy + PPF / ELSS

A pure-term policy for a sum assured will cost 12,600 per annum. The premium paying term and policy term is 15 years. In the earlier illustration, for the same metric the annual premium is ₹ 1.69,145. So, here you will be left with 1,56,545 for investment.

Pure-term Insurance Policy
Policy Term	15 years
Premium Paying Term	15 years
Sum Assured	25 Lakhs
Annualised Premium	12,600
Investment	1,56,545

Investment avenues can be chosen based on the investor’s risk profile. Those who are risk-averse can go for Debt instruments and those who have a high-risk appetite can go for equity investments.

Here, PPF is chosen as a debt instrument. At the end of the 15 years, the account will mature. In a financial year, ₹ 1.50 Lakhs is the maximum amount that one can contribute. But here the investment amount is 1.56 lakhs. There is a little excess contribution than the maximum limit which is negligible as this is done for understanding purposes.

For equity, ELSS is chosen. At the end of 15 years, while exiting the fund capital gains is payable. Tax calculations are given below.

		Term Insurance + PPF		Term insurance + ELSS
Age	Year	Term Insurance premium + PPF	Death Benefit	Term Insurance premium + ELSS	Death Benefit
36	1	-1,69,145	25,00,000	-1,69,145	25,00,000
37	2	-1,69,145	25,00,000	-1,69,145	25,00,000
38	3	-1,69,145	25,00,000	-1,69,145	25,00,000
39	4	-1,69,145	25,00,000	-1,69,145	25,00,000
40	5	-1,69,145	25,00,000	-1,69,145	25,00,000
41	6	-1,69,145	25,00,000	-1,69,145	25,00,000
42	7	-1,69,145	25,00,000	-1,69,145	25,00,000
43	8	-1,69,145	25,00,000	-1,69,145	25,00,000
44	9	-1,69,145	25,00,000	-1,69,145	25,00,000
45	10	-1,69,145	25,00,000	-1,69,145	25,00,000
46	11	-1,69,145	25,00,000	-1,69,145	25,00,000
47	12	-1,69,145	25,00,000	-1,69,145	25,00,000
48	13	-1,69,145	25,00,000	-1,69,145	25,00,000
49	14	-1,69,145	25,00,000	-1,69,145	25,00,000
50	15	-1,69,145	25,00,000	-1,69,145	25,00,000
51		42,45,719	25,00,000	61,27,458	25,00,000
	IRR	6.20%		10.41%

The final Maturity Value under PPF is ₹ 42.45 Lakhs as calculated in the above illustration. The IRR for Pure term insurance and PPF account is calculated at 6.20%.

The final Maturity Value under the ELSS fund is ₹65.36 Lakhs. The Post-Tax Value is ₹ 61.27 Lakhs. The IRR for Pure Term Insurance and ELSS is 10.47% (post-tax return).

ELSS Tax Calculation
Maturity value after 15 years	65,36,267
Less
Purchase price	23,48,175
Long-term capital gains	41,88,092
Exemption limit	1,00,000
Taxable LTCG	40,88,092
Tax paid on LTCG	4,08,809
Maturity value after tax	61,27,458

ii) LIC New Endowment Policy Vs. LIC Jeevan Lakshya

Some of the features of LIC Jeevan Lakshya are,

• Life coverage for the whole policy term with a limited premium paying period.
• The premium delivery method can be selected based on convenience.
• As long as the insurance is in effect, it will continue to share in earnings until the date of maturity.

Click Here to read the complete review.

iii) LIC New Endowment Policy Vs. LIC Jeevan Labh

Some of the features of LIC Jeevan Labh are,

• You profit from a constrained Premium Payment.
• The advantages include a Final Additional Bonus and a Simple Revisionary Bonus.
• Depending on the chosen term for paying the premiums, the Policy Term changes.

Click Here to read the complete review.

10. LIC New Endowment Policy Vs. Other Investment Options – Review Conclusion

We have compared and analyzed the LIC New Endowment Policy with Pure Term Insurance Policy + PPF / ELSS and also with other LIC endowment policies. Pure Term Insurance Policy + PPF / ELSS combination beats endowment policies hands down because of the reason that their insurance and investment components are separate.

11. Final Verdict on LIC New Endowment Plan – Good or Bad?

LIC New Endowment Plan is designed to provide financial protection to the LIC New Endowment policyholder’s family in the event of the policyholder’s death while also offering a Maturity Benefit if the policyholder survives the policy term.

When we analysed the plan, we couldn’t find any special feature. This is a simple plain Vanilla endowment plan promoted by insurance agents for their agent commission. The Maturity Benefit varies based on the bonus declared.

The return on investment under the LIC New endowment plan is not beneficial in the long run. Alternatively, if you opt for pure term insurance for life cover and invest separately, then you can yield better returns.

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