LIC New Single Premium Endowment Plan Review – Why You Should Avoid This Plan?
LIC New Single Premium Endowment Plan (Table No. 817) is a traditional participating non-linked savings cum protection plan. This is a typical Lic endowment policy where you have to pay only a single premium to stay life covered as well as get maturity benefits on survival.
Endowment policies are mainly designed to give a minimal return on investment with a very low life insurance coverage. LIC New Single Premium Endowment Plan is also of that kind. In fact if you read this review and then compared with other Lic endowment plans like Jeevan Labh or Jeevan Pragati, you will find similarities in case of return point of view. Anyway, let me share everything about this plan like maturity benefits, death benefits, how to surrender, how to use the Single Premium Endowment Plan premium calculator and find out the return etc at one place to make things easy for you.
Key Details of LIC Single Premium Endowment Plan 817
Here is the complete details about the eligibility criteria and various key aspects you might find interesting about this policy. As the name suggest, you have to pay the premium only once and then forget about this policy. LIC is marketing this policy as one of the best income tax saving option mainly in the last quarter of every financial year when people rush like anything to save last minute tax.
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Besides the tabular display of the key highlights of LIC New Single Premium Endowment Plan, let me share few more points which you should know about this policy before investing.
As per IRDA new regulations, the sum assured in all traditional products has to be min 10 times of annual premium if less than 45 years of age and minimum 7 times if age of life assured is more than 45 years for all policy term greater than 10 years.
- So, the min sum assured value has defined as Rs 50,000 and there is no upper limit. As per the new rule the premium amount will be multiple of Rs 5,000 to keep this sum assured value as per IRDA law.
- As a death benefit your nominee will get sum assured + simple reversionary bonus + final addition bonus, if any. And that is also depend up on the date of risk commencement as usual.
- You can surrender this policy anytime after the purchase, but you have the bear the loss as per the surrender clause. E.g. In first year 70% of the basic premium will be paid while any time after 1st year 90% of the premium paid will be paid as surrender benefit.
- You can apply for loan after completion of the 1st year only and the the loan amount will be how many years left for the policy.
- Income tax benefit under section 80C and 10 (10D) similar to almost every insurance policies.
LIC New Single Premium Endowment Plan – Returns Calculation
To do the calculation, you can check out the lic premium calculator page and search for the policy Single Premium Endowment Plan 817. Enter the data as below.
- Person Age: 25 Years
- Policy Term: 10 Years
- Premium Paying Term: 1 years only
- Sum assured: 5,00,000 [5 lakh]
Here is the details of premium as per various premium payment mode.
That means you have to pay Rs 3,63,850 to get a life insurance cover of Rs 5 lakh only and the return on investment considering bonus amounts will hardly be a 5% – 6% return after 10 years.
Why Single Premium Endowment Plan Will Fail To Protect Your Financial Targets?
What is the striking point here is for me, the premium amount for just a negligible life insurance of 5 lakh. As already mentioned many times, do you think the life cover of 5 lakh is enough for your family to handle financial crisis when you die?
Even if you consider the return on investment, I have seen that almost every endowment plan is giving a return of average 6% max if you consider a good bonus rates. Do you think after 10 years, you will be able to do anything with this investment? What would be the value of 5 lakh after 10 years?
Alternative Investment To Beat The Return of Single Premium Endowment Plan
Just in case you want to look for an alternative of Single Premium Endowment Plan, I think the very first thing you have do is to go for an online term insurance plan. You can check out how much you need to pay for a 1 crore online term plan.
If I consider Aegon Life iTerm plan, then you have to pay only Rs 8,000 (round figure of Rs 7978) every year. So if you want a life cover of 1 crore for next 10 years, you just have to pay Rs 8,000 X 10 = Rs 80,000.
Remaining balance for investment = Rs 3,63,850 – Rs 80,000 = Rs 2,83,850. Let’s invest this amount in any Fixed deposit scheme or you can even deposit in a tax saving FD as well.
I am using here the online ICICI FD calculator and found the maturity value as = Rs. 5,82,281 (considering the fixed deposit interest rate as 7.25%). I don’t think Lic Single Premium Endowment Plan can even return this much amount with the full premium payment also. If you can invest in Mutual Funds, then the return will be very high. As per historical data mutual funds generally give good returns for any investment more than 10 years and people get more than 10% return and even more. But remember that there is a risk involved, you may get negative return as well.
Should I buy Single Premium Endowment Plan?
Now I think it’s up to your understanding and risk taking capability to choose which is the best product to invest. In case income tax savings is your prime investment, then why don’t you explore ELSS mutual funds? Even bank tax savings FDs are also good for investors who are happy to get a moderate return. But a pure term insurance is a must if you are a person who is living a life from his/her own job or profession only.
If you have enough wealth and not interested to make things complicated, then I think staying with LIC of India is not a bad option. What is your opinion about this Single Premium Endowment Plan from LIC? Do you think this is a best insurance product or do you think it can meet up with your return on investment expectation?
Write a comment below and share your experience or any kind of query. Thanks for reading, please share the same if you find it useful with your friends and family.