A few thoughts on LIC Jeevan Vriddhi Plan

LIC has come up with a new single premium insurance plan that’s called the Jeevan Vriddhi plan and it’s pretty similar to the plan I reviewed last October called the LIC Bima Bachat Plan.

Essentially, you need to pay a single premium that gives you a coverage which is equal to 5 times the premium and then at the end of 10 years which is the maturity period of the plan you get some returns which are broken down between guaranteed and fixed returns.

The benefit illustration page shows that for a 30 year old you can expect returns of a little under 7% which is a fairly decent return for something that’s covered under Section 80C and it is certainly better than the 5% odd that the LIC Bima Bachat plan’s benefits were showing up to be.

Bear in mind though that there are several tax saver fixed deposits that offer upwards of 9% interest guaranteed and these have a shorter lock in period of 5 years as well.

If you aren’t interested in tax savings or have exhausted the 80C limits then the tax free bonds that are out these days like the REC tax free bond give close to 8% and that’s better than this too.

There are two things I’m not considering here, the first thing is that LIC does provide an insurance cover which the others don’t and I’m not giving that much weight because you really should have a term plan that takes care of your insurance needs and buying these type of products to take care of insurance needs is not a good strategy as it leads to getting into products with sub optimal returns and then you aren’t getting a lot by way of insurance coverage either.

The second thing I’m ignoring is the variable returns, and the reason for that is the way LIC is investing in disinvestment programs and incurring losses on those investments – it doesn’t inspire much confidence that they will be able to give you much by way of anything over the guaranteed returns. In fact, Business Standard has got a great article today on how LIC has incurred massive losses on the disinvestment stocks it has bought since 2009 and how it has missed out on all IPOs that have turned profitable since that time.

In going through this product I think this is not as bad as some of the other insurance cum investment products that you come across but at the same time I don’t see any compelling reason to invest in this. Philosophically, I have a mindset of not mixing insurance and investment and my default case is to stay away from such products and there should be something really sweet on offer to change my default case.

Finally, Ranjan and Hemant have done good reviews with calculations on their blogs and those are good reads for anyone considering investing in this product too.

LIC Jeevan Vriddhi Plan Review at TFL Guide

LIC Jeevan Vriddhi Plan Review at Personal Finance 201

60 thoughts on “A few thoughts on LIC Jeevan Vriddhi Plan”

  1. I wanted to go for an LIC jeevan ankur or marriage annuity plan for my 2 month old son, however i fear the returns are way too low. I want to know which Insurance policy gives the best return while covering life of the earner.

    Also what would a Jeevan Ankur or Marriage Annuity yeild in 18 years on 1 lac premium paid each year.


      1. i need to have one insurance policy that covers the risk as well as pays up even if lower than ppf or other safe instruments.

        So please advice which one to go for Jeevan Chaya, Ankur, Marriage endowment or a mixture of plans that gives me return as well as covers the risk.

  2. hi, i m 23. if i pay jeevan vriddhi single premium of 30,000 rs. how much i will get after 10 years.
    plz tell me.

  3. Like to know for FINANCIAL YEAR 2012-2013 (ass.yr 2013-2014) :
    For Rs. one lac in jeevan Vriddhi , how much deduction is available under 80-c FOR AGE OF 23 YRS OLD IF PURCHASED IN APRIL 2012.
    IS deduction of SEC10(10D) is available at END OF 10 YRS. There is controversy as lic agent are misguiding me for their own personal gains.
    Kindly more info. of this policy. MO. 09305045188 / 07875282663 .

  4. If I want to take this policy what will be the implications of section 80c and also at the time of maturity. The LIC agents are also not clear on this. Can somebody let me know about this.

  5. I agree with your point of not mixing insurance with investment. But the part of portfolio which you recommend to invest in debt or secured products may divert in such low yielding products which can generate around 7% to 8% return over longer run with little bit of life cover. What you can say?

    1. Again, there might be individual cases where this is useful, I’m not denying it. In the case you mention it perhaps is however I’d like to explore other alternates like a tax free bond or a tax saving saving fixed deposit that pays higher.

      I’m not saying it is completely useless but just that people need to evaluate it before making a decision.

      1. Evaluation of investment required not only for this investment, but to all products which they need to invest. Even what you are recommending them as best compare to this (tax free bond) are not purely safe product. But you can say tax saving fixed deposit as best option currently as they may lock with higher interest rate. Anyhow we can end up this discussion as, it is not so bad product compare to other LIC’s product. But not suitable for all investors. They need to think twice and match their goals, tax benefit available and returns (comparison with available options). What you say??

  6. I believe this plan would lose its 10(10D) benefit if bought after April 1, 2012.

    My understanding is, the budget demands that premium should not be more than 10% of the sum assured to be eligible for 10(10D) tax exemption. I think it is reduced from current 20% max to 10% max.

    And this plan is designed with fixed insurance cover of 5X.

    So, if you buy Jeevan Vriddhi after April 1, 2012, final proceeds are taxable. Does any one here, see it differently ?

  7. Hello

    I would like invest in LIC – Jeevan Vriddhi plan for Rs. 1,00,000 (one lac only). Not very clear about the returns, i.e. as an agent told, after 10 yrs of investment, we get the returns of 5 times, i.e hopefully it should be 5,00,000 / -(five lacs). IS IT CORRECT ???
    Also please let me know, what about the death coverage ? i.e. if any death happens in 3 – 5 yrs, will the payment of 5,00000 get immediately or should we wait til 10 years .

    Please clarify the details.

    thank you

    1. 5 times is not even close to what this plan offers. Even twice is not guaranteed. Take a print out of this LIC Benefits page, and show it to the agent and ask him how he’s saying 5 times when LIC’s official page only about twice the premium.


      The death coverage is 5 lakhs, and that’s different from the guaranteed returns. The returns are a lot less than the coverage, and you should bear that in mind before invest please!!!

      1. Manshu,

        What do you think about this LIC agent ?

        Is this person a crook ( purposefully misleading the customer) or an idiot ( who believes, sum assured is the final payout in the single premium plan ) ?

        We can forgive a client who is innocent making this mistake, but how can agent do this ?

    1. I don’t think that’s going to be material especially given the fact that the illustrations don’t take into account the service tax which is about 10%.

  8. All thoerists in India want to separate insurance and investment, but the common man sees LIC as the only one who can meet both needs at the same. He may not understand the intricacies of Term Insurance but he knows that if he survives the term he will not get any money and at the moment he is not in a frame of mood to see the enormous benefit ofa term insurance his nominees get if he dies, but can realise that he cannot enjoy that money.I think Manshu is missing this pointalso one has to look at advantages from 10(10) (D) in this policy
    Also I feel it is unfair to take out insurance and variable returns ,the stong points and then discuss it. If PPF is so great why all people don’t invest in it. , may be because of liquidity issues. I think Manshu has not looked at it from that Angle.
    People want to put their where they feel in the worst case scanario thier Money is safe and is paid to them. In that count LIC scores.
    For all the “great” articles manshu talks about , LIC has a safe fund of over 12 lakh crores at March 2011 Valauation. They did not build it in a day. And nobody beleieves that LIC is making losses on it. LIC has paid over 1000 crores as Divisidend in the last few years , every year.
    If Govt has asked LIC to bail it out beacuase LIC has got the money.
    I think Manshu should stick to the product and say if productt can fulfill the promise it has made.

    1. Unfortunately, there aren’t enough people to tell the common man that you can buy a mutual fund an a term insurance separately which will be cheaper than buying a product that combines the two because there are no handsome commissions on term insurance.

      For the other points, I myself have a term insurance from LIC and I’ve written about that here as well, so it’s not like this is theory that people sitting in ivory towers are writing about. That LIC invested in government IPOs is a fact, that those stocks currently trade at a discount to what LIC bought them in is also a fact not a figment of mine or someone else’s imagination πŸ™‚ These losses are going to affect the variable returns and people who want to invest in this product should be cognizant of that.

      I’m sure there are some people who will find this product useful, but the use case for that is pretty limited.

      1. Manshu,

        You hit the nail here. You very well understand the issue.

        The problem in India is Ignorant Common man and Common distributor who has to make a living, and the clueless regulator.

        The ignorant common man does not know that he can get a cheaper insurance cover and put investment in mutual fund. And he does not know he can approach a honest financial adviser and seek a opinion. Even if he find unbiased honest advisor, he does not want to pay for the honest help/service.

        The distributor who has taken up this as living wants to do a honest job, buy who pays him ? The person who pays him becomes his boss. And he has to listen to what he says. Instead of the client, the manufacturer pays him. So, he listens to him.

        The manufacturer churn out all mediocre useless products and ask the agent to sell them. Because this is the only way the manufacturer can make money. So, he splits his profits with the distributor.

        We have clueless regulators – IRDA and SEBI. If some body can fix this issue, they are the one who should it. They dont get it and think distributor is the problem and keeps on squeezing them out of last paisa.

        Result ?

        The mutual fund distributors have already deserted the industry and not insurance agents are leaving. The cream of the corps are already out, and only some religious folks who still pray to God and thinks, the industry will turn around are still hanging on.

        And you want honest advice ?

        Who is going to provide this advice of term+mutual fund to common man ? who is going to take care of his compensation for providing this excellent advice ? If there is no incentive, why would any one do that ?

        Who is affected due to this stand off ? Every one.

        Among all the options now available to common man, what is good ? Which product can be taken to his door by the distributor ?

        We can write all day about PPF, term insurance and mutual funds. It is not going to benefit common man in current regulatory environment.

        Even distributors need help in learning about new products, and like to know where it fits and like to know what type of customers can benefit.

        I am not saying Jeevan Vriddhi solves the problem of common man. Currently he is bombarded with endowment plans not even ULIP Plans. Did any one question why IRDA made the illustrations to show commission paid to the agents in ULIP Plans but not endowment plans ? Where is the transparency ?

        Head to head ULIP plans are much better than endowment plans. But IRDA made stupid move and got the ULIP plans put on back burner by the industry and distributors.

        How do we get common man to buy good products under such IRDA and SEBI ?
        Do you think any one in UPA govt cares about this situation ?

        1. There are fee based advisers who give honest advice and do exactly the type of thing you’re speaking about and I don’t know but you may be one of them yourself. There is a small but growing number of professionals in the field who are doing the right thing regardless of who is in power. You can’t blame everything on the UPA πŸ™‚

          1. Manshu,
            Yes, You are right. I am fee based adviser.

            Have not sold any endowment plans so far. I could not find a person who are fit for any endowment so far. Most of the problems are solved by Term+Mutual funds. And for some goal based investing, I sell ULIP and Child ULIP plans. ( yes, after taking care of term+mutual investments).

            Since I work for a fee from client side, I dont have this dilemma. And I don’t serve non-fee-paying common man. This group is abandoned by all good advisers. Only the agents who work on the manufacturer side are servicing them.

            It is not charity. I would not blame the agent here. They have to make their living. It is very difficult to educate the common man, after doing all the education, he is not ready to pay for your time. So, why would an insurance agent sell term+mutual funds to common man ?

            But the clients who chose me as their adviser, pay my fees; they end up saving money in short run and build lot of wealth over long run. I am sure there are many advisers like me who educate clients and explain how it works. But it is not easy business. The easiest way is selling LIC endowments and laugh all the way to the bank at the cost of clients portfolio performance. πŸ™‚

            Why I blame UPA ? We did not have these issues earlier. If we have strong govt, they can send right signal to the regulator. But they are busy sorting out one scam after other. If this is not Govt problem, whose problem it is ?

    2. Dear Mr.vml,
      When a common man sees LIC meet both needs at the same time, they fail to measure at what cost LIC meet both needs. If one invet Rs.100 in LIC, the return would somewhere be around 2%-5% on Rs.100 depending upon the policy. Instead, if one pays Rs.5 as Term paln premium for the same amount of cover and invest Rs.95 in PPF, one would get roughly twice the rate of return! Simple arithmatic will tell you which one is better. You get all benefits the endowment offers, 80C, 10(10)D, life cover, and better returns.
      Same theory applies for Term+MF combination against ULIP.

      Once your 80C needs are over, and if you are risk averse, you can invest in FD, Post office schemes, and debt funds, depending upon your needs and investment horizon. For example, IDBI bank, a nationalised bank, is offering 9.5% (10.25% for senior citizen) for FDs upto 10 years! Its better than endowment plans even if you calculate post tax returns @30% tax slab. See, though MF & equity investment has much better return potential over a long-term, I am not even mentioning it…be comfortable with your investment.

      Second, you mentioned liquidity, endowment plans are not that liquid, you can take some amount of loan, but they charge you interest for lending you YOUR money! The options I mentioned above has better liquidity.

      You also said: “If PPF is so great why all people donÒ€ℒt invest in it”, I don’t have figures of number of people holding PPF account and number of people having endowment plans. However, please note that unlike LIC & other insurers, PPF is not sold by a huge sales force of agents & distributers. One has to do all the leg work himself to open a PPF account. PPF is not advertised like LIC or other insurers, and common man doesn’t really calculate the exact annualized rate of return of these policies while buying them…ask any common man.

      I don’t also buy the argument that: “People want to put their money where they feel in the worst case scanario thier Money is safe and is paid to them. In that count LIC scores.”. Even money lying in a savings bank account does the job!!

      At last, it is an individual’s money and individual’s decision that will shape his/her financial future. A “stupid” financial consultant or “theorist” can show you hard facts and calculations, but finally you have to take the call whether to trust the consultant or the “intelligent” insurance agent who works for YOUR benefit, and NOT for his OWN commission… πŸ™‚

  9. Hi,

    Any product good or bad has to match your requirement to be in that category. The problem with traditional products is mismatch of an individual expectation and unawareness by agents.I am not sure how many will really put forward the exact result of these product in front of the investors. The question which i have asked in all forums is why such product in month of march?

    Major investors will come to know about the real return only after investing in it and that’s where the product becomes bad. 6 % return or 7% return are decent return when you consider fixed income category along with the tax free maturity. It can be a part of your debt portfolio but cannot form the major share of your savings.

    I am not satisfied with such product because it will be part of year end tax planning which all of us do in hurry and without understanding. From agents part I have seen the illustration entirely different from LIC delivering higher returns. Would have been good if LIC bring these products in middle of the year giving enough time to the investors.

    1. I guess this product is a proof of growing awareness as well as the competitive pressure that private players are putting on LIC. I hope this is note a one off and becomes the beginning of a positive trend.

  10. PPF Vs Jeevan Vriddhi : PPF has no 5X insurance, 6 years lock in;
    Taxable 9.5% FD Vs Jeevan Vriddhi : No 80C benefit, no insurance.

    What is the objective here ? finding the best performing 80C product. then it should be ELSS.
    Since this is review of Jeevan Vriddhi, we have to analyse the merits and demerits of it.

    LIC usually churns out useless 4-5% yield long term products year on year. Except for agents no one has made money on these plans. Occasionally LIC team makes product like this. ( is it by mistake ?) So, we should accept a good product as a good product.

    No point in rejecting all products just comparing them with PPF. Of course each of these product will fit specific customer needs.

    1. I talk about PPF since it has a higher return and 5X insurance is not much considering you get insurance worth 1,000 times in some term plans and you will need one of these type of term insurance plans if you want to get adequately covered.

      The FDs I mention are also FDs that are covered by 80C like the City Union Bank or Axis bank for example.

      Also, ELSS is NOT the best performing 80C product – that is on an entirely different risk profile and is like comparing apples to oranges.

      This LIC product is of course not as bad as other ones as you point out and I write about earlier in the post but I don’t see it having an exalted position among 80C products to warrant adulation such as show me another product that does this!

    2. Dear Raj,

      I can understand that you are trying to compare this product against LIC’s other low-yield products, and so you think that this one is a good product. In that sense you may be right. But if you look at this product alone, then this product makes some sense only for a young 30-35 year old guy who is in highest tax slab, and without any investment in 80C products, as you have mentioned yourself.
      But we must also consider that there are other products in 80C investment which will serve the same purpose in a better manner for the same young HNI. If he is risk averse, then PPF, otherwise ELSS. And for the life cover part he would just buy a Term Plan for that amount, and still be in profit because of the extra yield from PPF/ELSS over a period of 10 years, same tenure as in Jeevan Vriddhi.

      1. Debashish, I fully agree with you.

        When you analyze the product, write a full review. In what situation it is helpful and where it does not fit etc,

        This is a single premium product, so compare this with other single premium option. This is LIC traditional plan, so compare this with other traditional plans for any company or other LIC products.

        If you want to compare it with other 80C options, provide all information that is required for 80C investor to make a comparison.

        Here I feel author has taken a partial view ( may be due to lack of time) and did not explore all the features for full comparison.

        If every one should buy only term insurance and PPF, why do we need to do any insurance plan review ? With that approach, how many insurance plans can be reviewed favorably and can be concluded for “buy” ? If Manshu believes all the insurance plans ( non term) are crap, why so many pages in this blog ? One page should suffice.

        1. Comparing a product with another product only in its category rather than thinking for a solution and seeing which products can fit that solution is a narrow view.

          Looking at a product, its benefits and then going back to how you can benefit is the tail wagging the dog. You need to look at what you need, and what products fit that need and then write about that.

  11. I think authors idea of comparing this product against (1) Tax saver Deposits and (2) REC Tax Free Bonds are a mistake.
    Tax saver deposits dont give tax free yield, even though they are eligible for 80C benefits.
    REC Tax free bonds give tax free return, but no 80C benefit.

    If Jeevan Vridhi gives all these and in addition 5X insurance coverage, why fight it ?

    Not every one can sleep well in the night with equity based portfolio peacefully.

    Among all the endowment products, that are available to this community, this is not a bad product at all. Jeevan Anands and Jeevan saral are best selling plans and they make more people in this country poorer every day.

    We must appreciate LIC for bringing this kind of product. We should not criticize LIC even when they do things correctly ( for a change),

    Taking 80C benefit and 10(10D) benefit into consideration, a 35 year old is looking at 11% TAX FREE yield. This is not highlighted at all in the above review.

    Show me a product available today that is comparable to this plan.

    For those who have time, read full Analysis of returns and benefits:

    1. PPF comes immediately to mind, which is one product that gives you a better return within the 80C gamut, and come to think of it even a 9.5% FD that’s taxable will give you comparable returns since the interest is compounded quarterly for a period of 10 years.

  12. Manshu

    I am always of the opinion that every product is good , if it satisfies the requirement of the investor emotionally and financially. But what i found that some products (especially by LIC) satisfies people emotionally but may not always financially.
    Though this product may be taken as different as we are in high interest rate scenario which is getting passed onto the customers. but still returns are looking good for an YOUNG investor in 30% tax bracket and not for others.

    1. And even emotionally, it’s more a case of people thinking that it is satisfying them emotionally, I mean if you think about it – can any product that doesn’t satisfy you financially really satisfy you emotionally?

      1. Very true manshu, but that’s the trust LIC has built in people’s mind. This is the high time people should start thinking from financial but emotional angle.
        I have observed in the interiors and even among the urban people who has invested in LIC products and are least bothered about the returns, but if it is Equity linked products be it MF , ULIP etc. worries them a lot on performance. I personally feel that and you must agree with me that ULIPs are far better than these endownment plans( from investment point of view) if at all a person stay invested for longer period of time. Though as i always say that Investment and Insurance should be kept seperate.

          1. Dear Manshu,

            I am of the opinion that if you strictly compare between traditional endowment plans and ULIPs, then ULIPs are comparatively better products, provided one pay the regular premiums and also stay invested till maturity…10 years or preferably 15 years and more. But again mixing insurance & investment is always a bad idea.

          2. I somehow agree with Manikaran, as i feel that investments should always be transparent and flexible. With transparency i mean that are expenses and target asset classes should be disclosed, and flexible as in with payment of premiums and switching as per the risk requirement between asset classes and even withdrawals, so in both the cases ULIPs score much higher than endowment plans.
            So from investment point of view if i have to chose between endowment or ULIP , i will go with ULIP only.

          3. Why Manshu? any specific reason? for 10 years, if strictly one wants to put money in an insurance plan only, then i feel that one should opt for ULIPs than endowment . More Flexible, with changes in the expenses structure, i think these are more cost effective than an endowment product and moreover one can invest in a mix of asset class as per the risk profile and also if the product does not perform as per the expectation one can take positions as one likes. pl note that I personally don’t like and never advise to mix investment with insurance. this is just if one has to chose between endowment or ULIP.

            1. Because of the high costs which I feel are still higher than these type of plans. Maybe I’m not current enough on some of the new products that have come out.

              If you give me an example of a ULIP that you think is better than this product – I’ll be happy to look at it.

              Thanks for your comments!

              1. Dear Manshu,
                Allocation charge for ULIPs have come down to 4%-5% level, nobody knows what are the charges for traditional endowment plans. Agent commission for ULIPs are also much lower compared to endowment plans, roughly 1/3rd to 1/10th of endowment plan’s commission. And you have more flexibility including exposure to equity over a long-term…10-15 years or more. Strictly among these two product types, ULIPs are better.:-)

  13. Hi Manshu,
    Review on TFL Guide is done by Manikaran Singal. But I am on the same page “In going through this product I think this is not as bad as some of the other insurance cum investment products that you come across but at the same time I donÒ€ℒt see any compelling reason to invest in this……….”
    It is shocking to know how LIC is misusing money of policy holders – Monika Halan tweeted “ONGC bailout: from one govt pocket to another. But this is policyholder money. Ever wonder why lic endowment plans return less than 5%?”.
    There is one more report today, which revealed “Insurers lost over Rs 30k crore due to frauds in 2011”.

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