Saturday, December 13, 2008

Jeevan Aastha is a SINGLE premium assurance plan from LIC

LIC has recently come up with a One time single premium assurance policy in this market volatility. details of the policy are as follows according to the LIC's website.

Features:
LIC’s Jeevan Aastha is a single premium assurance plan which offers guaranteed benefits on death and maturity. The Plan is close ended and would be available for a maximum period of 45 days from the date of its launch i.e. 08.12.2008 .

Eligibility conditions and othe restrictions
a) Minimum Entry Age : 13 years (completed)
b) Maximum Entry Age : 60 years (nearest birthday)
c) Minimum Basic Sum Assured: Rs.150,000
d) Maximum Basic Sum Assured: No Limit
The basic sum assured shall be available in multiples of Rs. 30,000.
e) Policy Term : 5 or 10 years
f) Premium payment mode : Single premium only

Loan
Loan facility will be available to you under this plan , after completion of one policy year.

Surrender value

The policy can be surrendered for cash after the policy has run for at least one year. The minimum Guaranteed Surrendered Value allowable is equal to 90% of the Single premium paid excluding all extra premiums.

BENEFITS

A)Death Benefit:
On death during the first policy year: Basic Sum Assured with Guaranteed Addition.

On death during the policy term after 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

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.

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.

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

EXAMPLE:
A 35 year person taking 10 year plan
Single premium : 48975
Guaranteed Addition :Rs 100 per Thousand sum assured
Death Benefit : from 2nd year is 1 lakh and keeps increasing by Rs 5000 every year till the 10th year were it is Rs 1,50,000
Maturity / survival benefit : Is anywhere between Rs 1,00,000 to 1,10,000 at the end of 10 year period.

According to the LIC brochure, one will get Rs 100 per Rs 1,000 maturity sum assured per year for a policy of 10 years and Rs 90 per Rs 1,000 maturity sum assured per year for a policy for five years. This where people make mistake of doing the simple calculation and assume that the rate of return is 9% for fiveyear plan and 10% for 10-year .

A 13-year-old (minimum entry age) who opts for a cover of Rs 1.5 lakh by paying a premium of Rs 24,668 would get around 7.32%, whereas a 60-year-old (maximum age) who pays Rs 29,145 as premium would get around 5.55%.

NOTE: People who want to park there money in debt product for 10 year expecting an assured return of between 5% to 9% along with some insurance can go for it.

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