LIC Endowment New Jeevan Anand vs PPF vs Mutual fund
Hello friends, LIC is an insurance company. In my opinion, it should be insured but should not be combined with insurance as an investment. Why not invest in insurance, insurance is ten, and investment is not good (compound interest 4% to 6%). If inflation is also taken into account, the maturity amount after many years will not be happy.
LIC has many schemes for insurance with investment. The first one we are going to see is New Jeevan Anand which belongs to the Endowment category. https://www.licindia.in/Products/Insurance-Plan/anand
LIC Endowment New Jeevan Anand
A model is given in LIC. https://www.licindia.in/Products/Insurance-Plan/anand/abi.aspx
The age of the policyholder is 30. Term – 35 years. Sum Assured – One Lakh. Sum Assured – 3,165 per annum.
First, let’s take a look at the benefits of LIC’s endowment scheme in general.
1. Insurance – I am not going to discuss the insurance of Endowment schemes. Because the insurance coverage is very low. 330 per annum in Jeevan Jyoti Bhima Yojana, you will get not one but two lakh insurance. TERM INSURANCE for a higher amount. The reality is that Endowment cannot provide insurance equivalent to Term Insurance.
2. Vested Simple Reversionary Bonus – LIC determines the Bonus every year based on the return on its investments. Link -> https://www.licindia.in/Customer-Services/Bonus-Information. The bonus amount given in 2018 for our model above is 49 rupees per thousand Sum Assured. A total of 4,900. Adengappa, the money we put in is 3,165, do you think that 4,900 is a bonus? You can see this bonus with your eyes. Available only after project maturity. And there is no interest in this bonus.
As such, our example would result in a total of 35 bonuses, one per year. The same bonus may be available, or reduced, depending on the profitability of LIC’s investments in the future. The maximum bonus amount sampled from the LIC site is 32 rupees but I am using 49 rupees given in 2018 for our approximate calculation.
Bonus on maturity -> 35 years * 4,900 bonus = 1,71,500 rupees. Apart from this LIC’s performance may be given a special bonus at any time depending on the ink stone. It does not count as it does not change the maturity amount to a large extent.
3. Final Additional bonus – will be given once on maturity. The fixed bonus amount in 2012 is Rs 1,850 per thousand of the Sum Assured. Link -> https://www.licindia.in/Customer-Services/Bonus-Information/Bonus__For_2011-12
Final Additional bonus on maturity -> (1,00,000/1000) * 1,850 bonus = Rs.1,85,000
Sum Assured in the year 2054 -> 1,00,000 Sum Assured + 1,71,500 Vested Simple Reversionary Bonus (approx) + 1,85,000 Final Additional bonus (approx) = Rs 4,56,500. Compound interest at 6.78%. A modest 6.78% compound interest has been earned since it is a long-term investment of three and a half years.
PPF – Public Provident Fund
330 per annum in Jeevan Jyoti Bhima Yojana for insurance and the remaining amount invested in a much safer PPF would be expected (approx) -> Rs 5,80,000.00. Almost one lakh and thirty thousand more. I have calculated the current 8% interest of PPF just like how I have calculated the bonus amount of LIC in 2018 for all years. Like LIC Bonus this can also change. Also, the Jeevan Jyoti Bhima Yojana amount may also increase in the future. Since it is a central government scheme, it is assumed that there will not be a large price increase, so the price increase is not taken into account.
Mutual fund – Aggressive Hybrid Fund
This is if you take some courage and pay 330 per annum in Jeevan Jyoti Bhima Yojana and invest the remaining amount in Aggressive Hybrid Fund expecting 10% compound interest, the amount you will get (approx) -> 9,30,000 (double the amount you will get on maturity of LIC’s plan). Aggressive Hybrid Fund is subject to a long-term investment gains tax of 10%.
we will know:
LIC Endowment is non-refundable in case of termination of policy within three years after thirty days of inception.
If the policy is surrendered before maturity after three years, the first year’s policy amount will be reduced and a certain amount will be refunded as per the Special surrender value calculation. Most of the money invested is never returned. Please do not ask for a special surrender value account.
LIC agents are paid approximately 25% commission for the first year on endowment policies and 5% to 7.5% commission for every installment thereafter. The commission varies depending on the years of service of the agents.