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LIC’s  (Life Insurance Corporation of India) “Jeevan Vriddhi” is an endowment policy that has been in the market for the last few months and is slated to close shortly as this is a limited period offer. This review will be helpful to those of you who have not yet invested in this plan and are considering whether to.

Features of Jeevan Vriddhi:

• It is a single premium plan which means you pay the premium in one lump-sum amount.
• The tenure of the plan is fixed at 10 years.
• Death benefit is 5 times the premium paid.
• Survival benefits consists of two portions – Guaranteed Maturity Sum Assured and Loyalty Additions. The first one of these, as the name implies, is what you’ll surely get after 10 years if you do not die. The second one, that is Loyalty Additions, is a variable amount which LIC will decide on whether to allow or not depending on the profitability of the scheme. So as you can see here you may or may not get it depending upon the discretion of the company.
• Minimum premium payable is Rs.30000/-
• Minimum age of entry is 8 years.
• Minimum Basic Sum Assured, that is Death Benefit, is Rs.150000/-.
• Maximum age of entry is 50 years.
• There is no upper investment limit for Basic Sum Assured.
• If you opt for a higher Basic Sum Assured in which the premium payable by you is between Rs.50000/- to 99,000/-, you’ll get an extra Guaranteed Maturity Sum Assured of 1.25%. If it’s over Rs.100000/-, you’ll get an extra Guaranteed Maturity Sum Assured of 3.00%.
• You can take a loan after 1 year.
• If you surrender the policy after 1 year you’ll get a guaranteed surrender value equal to 90% of the single premium paid by you.

Review:

We’ll now review the policy under 2 heads – A.Death Benefit B. Survival Benefit or Returns.

1. Death Benefit: The minimum and maximum age of entry in Jeevan Vriddhi is 8 years and 50 years, which seems to be well within the normal survival rates of Indians. The Life Expectancy in India for the year 2010 was 65 years (http://www.unicef.org/infobycountry/india_statistics.html). So, chances of claims under this policy are quiet minimal, meaning, we should not look into buying this policy for the sole purpose of protecting our lives. Having said that, having a death benefit or the Basic Sum Assured of 5 times the premium is quiet attractive. But I guess if the chances of claims are low, it shouldn’t be a factor to worry about for the company or for you.
2. Survival Benefit: This is what endowment polices are all about, isn’t it? Most people buy endowment plans for their returns or Survival Benefits, for which the company has coined the term “Maturity Benefits”. Now, let’s take a look at what our investment in Jeevan Vriddhi would mature to. From the Benefit Illustrations for a 20-year old normal person, as given in the company’s website, we see that he has to pay a premium of Rs.30000/-, exclusive of Service Tax and he would be getting a Guaranteed Maturity Sum Assured of Rs. 58665/- after 10 years. This is a return of around 7% per annum. We are not considering the Loyalty Additions here as it is not guaranteed and you may or may not get it. With the average returns of most of the bank fixed deposits being around 9% currently, returns from Jeevan Vriddhi doesn’t look very attractive at all. The inflation rates for March 2012, as per data released in April 2012 are 6.89%. With average inflation rates hovering around 7% a year, returns from Jeevan Vriddhi, is at par with it, but in all possibility would be lower as the investment horizon is a long one.

Conclusion:

	Attractive Death Benefit. Surrender Value is attractive too. LIC brand name instills a sense of confidence.
	Endowment plans are costly in general. Fixed returns of 7% is not good if inflation rates go up in future. Long lock-in period of 10 years. Loyalty addition is not guaranteed. Death Benefit is irrelevant as there is little or no chance of a claim. No real life protection as higher Sum Assured would mean very high premiums, which will be un-affordable for most people.

So as we can see above, Jeevan Vriddhi do not gives us the confidence to invest in both the parameters of Death and Survival Benefits. It is better to wait and see what this insurance giant comes up with in future. And we will see whether we should go for it or not at that time. Till then, goodbye and I hope you would continue to make sensible financial decisions with the help of this blog.

Have you already invested in Jeevan Vriddhi? I would be waiting to see your comments down below.

Author: Chandan Seal

Hi! I have interests ranging from computers, gadgets, travelling, movies, music and off-course personal finance. If you enjoyed reading this article, come let's become friends. Connect with me at Facebook, Twitter and Google+. I am sure we can learn a lot from each other.