LIC Child Career Plan

POSTED BY jeevmail ON April 17, 2012 9:56 pm COMMENTS (7)

Hi Jago team,

I wanted to take some policy for my child and also looking for some investment in his name.One of my close friend has referred LIC’s Child Career Plan. I have also read many blogs for this policy, however still confused as returns from this policy looks attractive as per below table.

Child Career Plan-Plan- 184
Sum Assurred: 5,00,000/-
Premium Paying Term = 18 Years
Policy Term = 23 Years
Premium = 24725/-

The leaflet(given by my friend) shows that I will ge getting following amount for SA 5,00,000/=

18th year = 5,10,000/-
19th Year = 75000/-
20th Year = 75000/-
21th Year = 75000/-
22nd Year = 75000/-
23rd Year = 3,75000/-

Total premium paid = 4,45,050/= ( for 18 years, each premium 24725 = 4, 45,050)
Money return = 11,85,000/-

According to LIC website, it says as follows.
Survival Benefit:
On life assured surviving to the end of the specified durations an amount specified below is payable:
5 years before the date of expiry of policy term – 30% of the Sum Assured along with vested
Simple Reversionary Bonuses
4 years before the date of expiry of policy term – 15% of the Sum Assured
3 years before the date of expiry of policy term – 15% of the Sum Assured
2 years before the date of expiry of policy term – 15% of the Sum Assured
1 years before the date of expiry of policy term – 15% of the Sum Assured
On the date of expiry of policy term – 15% of the Sum Assured along with Final (Additional) Bonus, if any.

Reversionary & Interim Bonus for 2011 is as below for Child Career Plan.
11 to 15 yrs = 34/- per thousand
16 to 20 yrs = 38/-
21 yrs & above = 40/-

According to above table, my calculation shows that around 10.5% return which is greater than PPF(8.6%)(it may not be correct as well). I would like to understand how bonus is calculated and wanted to know if this LIC really yeilds more than PPF?.

I have spread my investments in few LIC policies, PPF, Mutual fund and directly in shares. I am not interested in term plan as my present company covers at its best and I am happy about it. However for future planning(with less risk) I wanted a good investment

Sorry for long question.

Best regards

7 replies on this article “LIC Child Career Plan”

  1. jeevmail says:
    April 19, 2012 at 8:35 pm

    HI All,

    Thanks for reply.

    Even I am not sure how projections were calculated as it was on printed leaflet. Hence I wanted to know how LIC bonus were calculated.

    Below is as per my calculation.

    5 years before policy term – 30% of the Sum Assured along with bonus = That is after 18 years,
    30%*5,00,000=1,50,000 + Bonus = 500000/1000*34*18=306000 = Total 4,56,000/-

    4 years– 15% of the Sum Assured ( 15% * 500000=75,000)
    3 years– 15% of the Sum Assured ( 15% * 500000=75,000)
    2 years– 15% of the Sum Assured ( 15% * 500000=75,000)
    1 years– 15% of the Sum Assured ( 15% * 500000=75,000)
    On the date of expiry of policy term – 15% of the Sum Assured along with Final (Additional) Bonus,
    ( 15% * 500000=75,000) + 500000/1000*38*5=95000 = 170000/=
    (Bonus for years from 18 to 23 = 38 Rs per 1000) + some additional bobus if any

    So as per my calculations, the total would be 9,26,000/= for the investment of 4, 45,050. The return is not guaranteed.

    I have decided to go with Term plan + PPF.

    Reply
    1. ashal jauhari says:
      April 20, 2012 at 12:29 am

      Dear Jeev, Please accept my congratulations in advance for a wise choice.

      Thanks

      Ashal

      Reply
  2. ashal jauhari says:
    April 18, 2012 at 5:46 pm

    Dear Jeev, There are 2 basic problems in your projected nos. 40 Rs. per anum per 1000 sum assured has been taken as constant or should I say guaranteed but it’s not the case. At the end of the policy term, again a final bonus of 300000 Rs. has been assumed but in actual it ‘ll be very lower than what you are anticipating. Remember this policy is not a guaranteed return type policy. Even If I assume your own nos. the XIRR is coming 8.1% which is too good to be true. I’m not counting tax benefit on this policy.

    Can you imagine, a simple product like Term plan + PPF can surely beat this product. Please do not go for my words, check on your own.

    Thanks

    Ashal

    Reply
  3. Ramesh says:
    April 18, 2012 at 2:27 pm

    I think there are some issues with the values presented in the original query.

    18th year = 30% mean 1,50,000 (and not 5,10,000).
    Then 19th to 22nd = 75,000 each.
    23rd year=75,000 (and not 3,75,000).

    plus any bonuses @ 3.5-4.0%.

    Please recalculate.

    Reply
  4. Ramesh says:
    April 18, 2012 at 8:32 am

    Doesn’t 34 per thousand actually mean 3.4 per 100 = 3.4%.

    I would keep money in Yes bank then, which at this point of time gives me 70 per thousand!

    Reply
  5. justgrowmymoney says:
    April 17, 2012 at 10:15 pm

    How did you arrive at the payout for year 18 and at end of policy term?

    Also for years 19-22 you will get 15% of 5 lacs = 15k each year not 75k. If I make just this one change I get an IRR of 6.87% already. If you can explain how the values for year 18 and end of policy term are arrived at we can discuss!

    And – Term Plan from employer is good. But unless you are in govt service your job is never secure. You may perhaps change jobs after 5 years. The term plan gets expensive as one grows older. Take a term plan now.

    Reply
    1. justgrowmymoney says:
      April 18, 2012 at 12:05 am

      I rue my numbers on the 75k vs 15k, call it key in error.

      Would be interested in knowing the year 18 and post maturity calculations you have – if they are guaranteed/expected though

      Reply

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