LIC has launched two products in the new year, and in this post I’m going to review one of them, which is the New Jeevan Nidhi Plan.
This is an insurance product that gives you life cover and at maturity, you are then compulsorily required to either buy an annuity product from LIC or buy another single premium deferred pension product from LIC.
This is a key thing to remember – you are bound to invest the maturity proceeds in another LIC pension product, and to that extent I wonder if you wanted to do that, why not buy that product right now itself?
As far as I can see – LIC has two types of annuity products – immediate annuity and deferred annuity.
LIC Jeevan Akshay is an immediate annuity product, which means you pay, and start getting the annuity immediately, you can’t build your funds over a number of years, and then get pension. So this won’t be suitable for anyone who doesn’t need pension right now.
LIC New Jeevan Suraksha however is what’s called a Deferred Annuity Product, and that means you pay premiums over a number of years, and then get a pension after the maturity of the product.
The key difference however is that New Jeevan Nidhi gives you a life cover as well, which is not given in New Jeevan Suraksha. It is important to emphasize here that the life cover you get from this product will at best beef up your existing life insurance, and on its own is not going to amount to much if you do indeed meet your maker.
So, based on this, I think someone who is looking for the following things should investigate this product further:
- Your retirement is still a number of years away
- You want to buy a pension product from LIC when you retire.
- You have life cover right now which you want to beef up with some other insurance products.
Please leave a comment if you can think of any other reasons, or if you feel there is any error in my reasoning.
New Jeevan Nidhi Plan Features
This product gives you life cover and in addition to the sum assured there is a Rs. 50 per 1,000 Guaranteed Addition for each completed year in the first five years, so if you die within the first five years then you will get the sum assured plus the guaranteed additions accrued to you.
After the first five years, the plan starts to participate in the profits of LIC, which is called the Reversionary Bonus, and you will get the basic sum assured plus guaranteed addition plus the reversionary bonus plus any other final bonus declared.
This money can be paid out in lumpsum or also in form of an annuity.
Vesting is when the term of the policy is complete and you’re ready to get the benefits from the policy. The New Jeevan Nidhi page on the benefits show that if they made a profit of 8% per year during the term of the policy for a 35 year old who took a policy for Rs. 1 lakh for 25 years, the total premiums paid will Rs. 1,03,025 and the total benefits will be Rs. 2,33,500. The annual premium comes out to Rs. 4,121.
Now the important thing to remember is that this is just an example, and your returns could be lower than this if LIC makes less money or higher than this if LIC makes more than this, but it’s best to be conservative at the time of investing and think that you are not likely to get higher than this amount. (Anyone reading the stories of LIC bailing out PSU IPOs could tell you that)
In fact in their illustration if they make a profit of 4%, there is no bonus at all, and you get just Rs. 1,25,000 in that case which shows you how much the returns can vary, and no one can really look that far out in the future and say what will happen during that time.
Eligibility Criteria and Other Features of New Jeevan Nidhi
You have to be at least 20 years old and no more than 60 years of age to take this policy. You need to at least get a minimum basic sum assured of Rs. 1 lakh, and the policy term can be from 5 to 35 years.
The premium can be paid monthly, quarterly, half yearly, yearly or you can even buy a single premium policy. There are rebates in the sum assured if your premium is over a certain amount and that also depends on your premium payment term.
The current high interest rate environment gives you a lot of options (Read: 10 Safe Investments in India) where you can invest your money for long durations of time and get sure returns, and I tend to favor those instead of buying this with all the uncertainty over returns, and then the condition to invest only in a LIC annuity product after vesting.