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LIC Policies Explained

Monday, June 10, 2013

Manoj Aswani is VP at

I have a LIC Jeevan Suraksha Plan (Pension). I have been paying the premiums for the last 12 years. However I am not sure about the benefits of this plan. Can you help?
—Raju Varlekar, Khar West
LIC New Jeevan Suraksha 1 Plan is a deferred annuity plan. LIC New Jeevan Suraksha-1 Plan is with bonus deferred annuity plan. This is a non unit-linked pension plan. The corpus is created to provide pension for old age after Vesting Date.

In this plan, the premium is paid till the end of the policy term, i.e. till the pension starts from the Vesting Date. At the start of the plan, the policyholder gets to select a Notional Cash Option. The Notional Cash Option along with accrued Bonuses forms the maturity proceeds. The policyholder can withdraw 25% of the entire maturity proceeds including bonus and receive a lump sum amount on vesting and the remaining 75% amount will surely be converted into annuity. There are 5 annuity choices at present to choose from. An additional 3% rebate would be given on the purchase price of the annuity at the vesting date. At the time of vesting, the annuity rates for Immediate Pension Plan LIC Jeevan Akshay VI Plan would be considered.

However, if the life insured dies before pension starts, all premiums paid + interest on the same is returned. If death occurs after vesting date, it depends entirely upon the pension option whether any Death Benefit would be payable or not.

The vesting benefits are as follows:
1.    There are 5 options for Annuity in this plan:
    a.    Annuity for life
    b.    Annuity for life with guaranteed period of 5, 10, 15, 20 years
    c.    Joint life and last survivor annuity to the annuitant and his/her spouse under which annuity payable to the spouse on death of the purchaser will be 50% of that payable to the annuitant
    d.    Life annuity with return of purchase price
    e.    Life annuity with annuities increasing at a simple rate of 3% per annum

The annuity rates will be that available under the version of the New Jeevan Akshaya Plan current at the date of vesting. A rebate of 3% will be available on the purchase price of the New Jeevan Akshaya Policy. Option for the annuity type is to be exercised at least 6 months before the date of vesting

2.    If it is not your vesting age yet, you can surrender the plan but the amount becomes taxable in your hands. The Guaranteed Surrender Value will be equal to 90% of all premiums paid excluding the first year premium, all Term Assurance premium and extra premium (if any). This will be allowed after at least two full years’ premiums have been paid and will be available after two full years have been completed from the date of commencement. However, the policy cannot be surrendered after the annuity vests.

3.    On vesting, you can withdraw 1/3rd the entire corpus tax free under section 10(10)A and start annuity from the remaining.

I have been advised LIC Jeevan Anand Plan. I am 29 years old and I wish to take a 46 years old plan with PPT for 46 years. SA = 10.00L. Premium shown from premium calculator is 18702/- in LIC website. Will there be any change in premium amount if I take the plan through an insurance agent? Is there any option for same plan and same criteria to reduce the premium amount? Due to online and offline mode for opting the policy, I need clarification.
—Brinda Menon, Santacruz East
The Premium Calculator would show:
   Age    : 29
   Policy term  (in yrs.)    : 46
   Payment term (in yrs.)    : 46
   Yearly    : 18,702.00
   Half yearly    : 9,513.00
   Quarterly    : 4,838.00
   Monthly    : 1,703.00
But please understand that the premium mentioned in without service tax. Hence when you purchase the plan, the tax part would be included. Also, there would be no difference whatsoever if you approach with an agent because LIC Jeevan Anand is an offline plan and cannot be purchased online. The premium mentioned above is the one you would have to pay irrespective of where you buy it from. So, it is best that you apply for it from a known agent.

I have taken Jeevan Saral policy. The policy is for 35 years. My yearly premium is Rs. 1000776. Since 28/03/2012, I am regularly paying the premium. My age as of today is 30 years. Please suggest whether I should continue to pay the premium or discontinue the policy? What is this plan all about? If I continue to pay the premium, what is the expected amount I will receive at the end?
—Deven Karlekar, Mira Road
LIC Jeevan Saral Plan is one of the best endowment plans of LIC. Hence you MUST continue the same, if you can afford it.

The Death Benefit in this plan has been defined as 250 times the monthly premium + Return of premiums excluding extra/rider premium and first year premium + the loyalty addition, if any.

The Maturity Benefit in this plan has been defined as Maturity Sum Assured + the Loyalty Additions, if any.

The Special Features of this plan are:

  • High risk cover at low premium
  • Extended risk cover for one year after 3 years premium payment
  • Optional higher cover through Term Riders
  • The policyholder can choose a maximum term but can surrender at any time without any surrender penalty or loss after 5 years
  • Any number of withdrawals through partial surrendering

Thus, in your plan, on Policy Maturity, you would get:
Maturity Benefit= Maturity Sum Assured, which has been defined at the start of the policy and is also mentioned in your policy bond + Loyalty Additions.

Thus, total Premium you pay is Rs 100776 X 35 years, i.e. 35027160.

Now, from the illustration that you would have received, your Maturity Sum Assured would be Rs 42684458 which would be defined at Policy Inception on your Policy Document itself and Loyalty Additions at the rate of 6% would be approximately Rs 32338000 and at the rate of 10% would be Rs 138500250.

Thus your Maturity Benefit at the end of 35 years would be approximately Rs 75022458 at an illustration of 6% Loyalty or Rs 181184708 at the rate of 10% Loyalty.

Hope this clarifies.

(The author is Vice President at, insurance comparison website in India. You may write to him at [email protected]).

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