LIC Whole Life Limited Payment plan is an insurance policy that covers your life, and then at the time of maturity it pays you out a certain amount as well.
Technically the policy doesn’t mature because it is whole life assurance (and by this I mean I’m just repeating what their website says) but you get the sum assured plus all the bonuses 40 years from the date you start the policy provided you are 80 years old at the time.
So, if you are 39 years or younger you will only get the sum assured when you are 80, and if you are 40 or older then you will get the money in 40 years time.
You have the option of different premium payment terms in this plan – you can pay the premium just once at the beginning of the plan, pay it annually, pay it for 10 years or structure it in some other manner.
The insurance will last throughout the life time of course, and at age 80, you are guaranteed to get the sum assured back plus some variable returns based on the returns that LIC themselves generate.
These are variable and depend on what LIC earns way into the future.
I created a Google Spreadsheet to look at the IRR of these returns based on the illustrations of LIC and they range from 3.66% to 6.47% for the two options with periodic investments and from 4.5% to 7.5% for the one time investment.
These are of course all examples, and nothing is guaranteed in this. Here is the spreadsheet that you can look at and modify as well. Now, these are actually not bad returns when you think about the other products that we have reviewed here, but the trouble is with the relatively low sum assured, and how far out in the future the payment is made.
Vishal who brought this product to my notice said that his agent sent in a quote for a Rs. 35 lakh term insurance for Rs. 13,500 for 35 years, and he asked Vishal to take a look at this LIC Whole Life Payment policy where you pay Rs. 26,000 for 40 years to get a sum assured of Rs. 10 lakhs, and get Rs. 80 lakhs at the end of 40 years. That 80 lakhs is of course based on assumptions and for us I think it’s fair to think that the returns will be within the 3.5% to 6.5% range for this policy.
From the quotes that Mr. SM Gupta had shared on various sample term insurance plans, we know that you can easily get a policy of Rs. 25 lakhs from private players for a little more than Rs. 5,000 and you can then combine that with a policy from LIC to get additional coverage.
If this is the only insurance you’re going to get then that’s a bad idea, but if you have an insurance with a private insurer and want to supplement that with something from LIC then you may consider this keeping in mind the factors that we have talked about above.
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