LIC has introduced another Product called “Jeevan Astha” …
http://licindia.com/endowment_008_benefits.htm
Let me take one by one each line and do some analysis and raise some questions.
A)Death Benefit:
On death during the first policy year: Basic Sum Assured with Guaranteed Addition.
On death during the policy term after the first policy year, excluding last policy year: 1/3rd of Basic Sum Assured with Guaranteed Addition.
On death during last policy year: 1/3rd of Basic Sum Assured with Guaranteed Addition along with loyalty addition, if any
Some points here to consider:- Your risk cover will be 6 times your investment and just 2 times for the rest of the duration + some loyalty addition if any. So, in a nutshell, it as good as saying your Cover is just 2 times your premium …
– What does it mean? you will get double our initial investments if you die after the first year.
This is the case when you die …
B)Maturity Benefit:
On maturity, the Maturity Sum Assured along with Guaranteed Addition and Loyalty Addition, if any, shall be payable.
Maturity Sum Assured shall be 1/6th of Basic Sum Assured.
– Means, if your premium is Rs 1,00,000, then Basic Sum assured is Rs 6,00,000 and hence, Maturity Sum Assured is Rs 1,00,000
C)Guaranteed Addition:
The policy provides for Guaranteed Addition at the following rates:
-
Rs. 100 per thousand Maturity Sum Assured per year for a policy of 10 years term.
-
Rs. 90 per thousand Maturity Sum Assured per year for a policy of 5 years term.
– Means, if your premium is 1,00,000, then your Guaranteed Addition is Rs 10000 (10 yrs) … Means, You will get Rs 1,00,000 as Guaranteed Addition in 10 yrs .. and along with your original capital, you will get back Rs 2,00,000 back after 10 yrs.
D)Loyalty Addition:
Depending upon the Corporation’s experience the policy will be eligible for Loyalty Addition on death during the last policy year or on the Life Assured surviving the stipulated date of maturity at such rate and on such terms as may be declared by the Corporation
This may or may not be there.
Now, let’s take a real like example.
Ajay takes a 6 lacs policy over a 10-year term.
Jeevan Aastha Premium = 96,960
The amount he would get if he dies in the first year: 6,00,000
Amount on Maturity : 97000 + (10*10000) = 197000 (loyalty bonus is not assured , so not adding it)
from what angle do you think this policy makes sense. You are maximum doubling your money in 10 yrs and nothing else. And the best time to die after taking the policy is the first year itself .. then you can get a little benefit (but still at a big cost).
I don’t understand why people complicate things .. LIC plans to collect Rs 25,000 Crores from this policy, and I am sure they will succeed. Because there are many people in our country, who don’t understand the effects of Inflation, compounding and get confused with all those confusing statements.
Now if you are a regular reader of this blog .. then you should be able to utilize Rs 97,000 to generate better returns than Jeevan Astha.
Let us do this …
1. Insurance for the cover of 6 lacs, not just for the first year but for all 10 years .. Simple: Take a term Insurance of Rs 6 lacs for 10 yrs, it’s around Rs 9840 (single premium, SBI life insurance for a 26 yr old ) …
2. After this, you are left with around 88,000, which you should invest in Equity Diversified mutual funds either one time or through SIP for 10 yrs … Even if we take a 10% return. It would be 2,28,000.
When it comes to Investing, just Keep it Simple, Stupid (K.I.S.S) … 🙂
UPDATE (28 AN 2009 ): Shyam Pattabi (writes for HINDU) also shares his similar thoughts on this product at http://www.shyamscolumn.com/2009/01/guaranteed-return-schemeanyone.html ( i am glad I made correct analysis)
Update (Jan 19, 2008): On NDTV Profit, Monika Halan has given comments that “Jeevan Astha” should be the last product you should look for and only if you have cash to put nowhere, They have given “Don’t Buy” rating to this product and they also said that this product has lots of hype got created. Monika Halan is Editor of “Outlook Money” and One of the most mature and best personal Finance advisor I can think of.
Disclaimer: The above analysis is based on my study and should not be taken as investment advice or discouragement from advice, use your own analysis to take your decisions. I will not be responsible for your investment decisions.
Happy Investing
Manish