Decoding LIC’s Jeevan Utsav!

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“Private school teacher Yogesh wants to invest for retirement. An insurance agent advises him to buy LIC’s new Jeevan Utsav plan. The agent explains that by paying a premium for a limited period, he will get life cover and regular income for entire life. Yogesh finds this plan attractive. By the way, people like Yogesh who want to earn regular income by investing for retirement should first properly understand LIC’s Jeevan Utsav plan . Let’s understand how this plan works? How it provides regular income?

LIC’s Jeevan Utsav is a non-linked, non-participating, individual, savings plan. The policyholder will not receive any bonus or surplus. This is a guaranteed plan in which the amount of benefit is already determined in case of death or survival. This is a complete life insurance policy. Infact, one can say that it is a 100-year life insurance plan. If the policyholder lives for 100 years, he does not get any benefits. He doesn’t even get any maturity benefits either. but it is the family of the insured person and the policyholder they will get benefits. The first thing is that the family gets financial assistance in case of the policyholder’s death. and the second is that the policyholder gets a 10% sum assured every year for life. This he will get after a specified time of paying the policy premium.

The minimum insurance amount in the Jeevan Utsav plan is 5 lakh rupees. Premiums can be paid for 5 to 16 years. Investment can be made from the time the child turns 90 days of age to the time same child or the policyholder grows up and becomes 65-years old.

There are two types of payment method. the first is regular income and the second is flexible income. In regular income, you get annual returns and in flexible income, you can keep that money deposited.”

If a 35-year-old person opts for 10 Lakh rupees Sum Assured in the Jeevan Utsav Plan. Then, he would contribute premiums for 10 years until the age of 44. As this is a Whole Life Insurance policy, he will get insurance coverage and regular income until he is of 100. Additionally, an Accidental Death and Disability Benefit (AD&DB) rider of 10 Lakh rupees can be added to the plan. This remains valid uptill the policyholder attains the age of 70. The annual premium for the first year would be 1.18 lakh rupees. Then, you would have to pay 1.15 lakh rupees in each subsequent year.

In the Endowment Plan of life insurance policies, 4.5% GST is levied on the premium for the first year. This becomes 2.25% in subsequent years. The total premium payments, including GST, would amount to 11.58 lakh rupees over the 10-year period. With the Regular Income option, starting from the age of 48, you would get an annual income of 1 Lakh rupees.

Choosing the Flexible Income option allows for a variable annual income. The insurance company will provide an annual interest of 5.5% on the total amount. In this plan, one can withdraw up to 75% of the total amount at once, including the interest. The remaining balance will continue to accrue interest at the rate of 5.5% per year.

LIC has announced a guaranteed addition of 40 rupees per thousand of the basic sum assured at the end of each policy year. This you will get during the premium payment term. In case of death, the Death Benefit will be the higher of the Basic Sum Assured or 7 times the annual premium. The Death Benefit cannot be less than 105% of the total premiums paid. If riders are added, their benefits will be provided separately.

The question now is, who is the Jeevan Utsav policy right for? Personal finance expert Jitendra Solanki says that Jeevan Utsav is a whole life policy that works to generate cash over the long term. It is a good option for estate planning. Those who want to leave an estate for their children can invest in it. The policyholder will get income from the plan for a long time. After that, the nominee will receive a lump sum amount… However, the annual net return of this policy is less than six percent. This is not effective in beating inflation. If you invest in mutual funds for such a long period, you may get better returns.

If you have surplus funds and want to pass on some investments to your family, you can opt for LIC’s Jeevan Utsav policy. This will provide you with income for a long period. Your family will receive a lump sum amount after your demise. If you do not want regular income, then, the interest rate will 5.5 percent. However, you may not beat inflation. In such a case, you should evaluate the pros and cons before taking the policy.