LIC’s Jeevan Labh Plan Review – Is It Best Tax Saving Option In India?
LIC’s Jeevan Labh Plan (Table No 836) has launched in 2016 January, the time when most people are looking for income tax saving option to get income tax benefits. Every year LIC of India launch similar kind of products to attract investors. Is LIC’s Jeevan Labh Plan a good income tax saving investment option?
In this article I will try to share my thoughts and analysis on this Limited Premium, non-linked, with profit Endowment Plan LIC Jeevan Labh policy by explaining various key features like LIC Jeevan Labh maturity benefits, premium calculation, survival benefit, death benefit & complete review of LIC Jeevan Labh plan.
Key Highlights of LIC Jeevan Labh Plan 836 | Eligibility Criteria
Jeevan Labh is a limited period premium payment endowment plan. That means in case the policy term is 20 years, you may have to pay the premium for 10 years only. Anyway let’s find out some key features of LIC Jeevan Labh Plan.
|Minimum Age at Entry||8 Years (Completed)|
|Maximum Age at Entry||59 Years for 16 Year Term|
|54 Years for 21 Year Term|
|50 Years for 25 Year Term|
|Premium Paying Mode||Yearly, Half Yearly, Quarterly, Monthly (ECS Only)|
|Policy Term (Premium Payment Term)||16(10), 21(15), 25(16)|
|Basic Sum Assured||2,00,000 and above (in multiple of 10,000)|
|Premium Payment Mode rebate||2% on yearly, 1% on Half Yearly, Nil on Quarterly & Monthly|
|Rebate on High Sum Assured
(Per 1000 of Sum Assured)
|0% up to 4,90,000|
|1.25% for 5,00,000 to 9,90,000|
|1.50% for 10,00,000 to 14,90,000|
|1.75% for 15,00,000 and above|
|Loan||After 3 years|
|Surrender||After 3 years of full premium payment|
Mainly LIC of India is marketing this policy with few of the eye catching features like
- Less premium payment term, at the same time life cover for more years.
- Good investment option for Child’s future education and other expenses.
- One can get LIC’s Accidental Death and Disability Benefit Rider and LIC’s New Term Assurance Rider to get more benefits with little more premium.
- Income tax benefit under section 80C and 10 (10D) similar to almost every insurance policies.
- The policyholder’s nominee will receive Sum Assured + Bonus + Final Additional Bonus (if any) as death Benefit under Jeevan Labh plan.
- Maturity Benefit under Jeevan Labh : Sum Assured + Bonus + Final Additional Bonus (if any).
LIC’s New Plan Jeevan Labh– Returns Calculation
To do the calculation, you can check out the lic premium calculator page and search for the policy Jeevan Labh. Enter the data as below.
- Person Age: 25 Years
- Policy Term: 16 Years
- Premium Paying Term: 10 years
- Sum assured: 5,00,000 [5 lakh]
Here is the details of premium as per various premium payment mode.
Just take the data of annual premium only, which is Rs 42,613 [including taxes]. That means you are going to pay Rs 42,613 X 10 = Rs 4,26,130 in next 10 years.
Now just for example if we consider the LIC bonus rate for Jeevan Labh plan is Rs 40/1000, then you will earn a bonus of Rs 20,000 every year. That means total 3,20,000 in 16 years duration. Regarding, Final Additional Bonus, I think LIC don’t offer any FAB bonus for policies with term less than 19 years. But still consider a FAB of 2% of SA and the amount will be approx = Rs 1,00,000
So, here the maturity value of this plan after 16 years will be Rs 4,26,130 + Rs 3,20,000 + Rs 1,00,000 = Rs 8,46,130 (approximate only). This is just for calculation purpose only.
Now just think that, your investment is not able to get doubled or just got double in 16 years duration. In that period if you die, your family will get a life cover of 5 lakh + bonus accumulated till date. Even if you survive, you will get just double of your investment which is merely a return of around 5% – 6% max, without considering inflation factor.
You might say you have saved income taxes and that also need to consider here, but that will also not save much. At least if you consider the inflation as 6% steady for next 16 years, your net return on investment will be hardly 2% – 3% even if you save income tax declaring the policy premiums every year.
Should I Buy Lic Jeevan Labh Plan? What are the Alternative of LIC Jeevan Labh Policy?
This is the section where I always try to share that you have to understand why you are buying a financial product. What is the purpose for the investment etc. I am saying that LIC Jeevan Labh is the worst product created ever. It is a good plan with decent investment with a life insurance coverage for those people who don’t want to take much risk on investment and happy to get such small life cover.
There are people who are not bothered about their retirement or life after their death may be due to a wealthy financial background. For them saving 30% income tax and stay with a trust worthy company like LIC of India with a lower rate of interest may be fine.
But if you are a person whose family is solely depending up on the job or profession you are doing right now, then this plan is not for you. First of all you need a pure term life insurance with high sum assured value like 1 crore term plan. Then invest money for long term in mutual funds or other investment products to give a good return to finance your kids education and other aspirations. A pure term plan + Mutaul Fund + PPF account could be the best combination where you can save income tax and also make sure you will receive a great return in long term.
What do you think about LIC Jeevan Labh plan? Do you really think these typical endowment policies are good enough to give you the best return in long term with an adequate life insurance coverage? I would like to hear from your experiences here, do write a simple comment below to make the discussion for worthy for our readers.