LIC New Jeevan Nidhi Plan
It is a deferred annuity plan with bonus. This is a non unit-linked insurance pension plan. This plan is purchased to cover the risk of living too long and hence has multiple pension options to cover that risk. The corpus that is created to provide pension for old age is the Sum Assured + Accrued Guaranteed Additions + Simple Reversionary Bonus + Terminal Bonus. The age where pension is payable is called Vesting Age and the date when pension starts is called Vesting Date.
LIC New Jeevan Nidhi – Eligibility Conditions
- Guaranteed Additions– LIC has kept guaranteed additions only for first five years and at the rate of Rs 50 per thousand in Jivan Nidhi.
- Bonuses- Since there is guaranteed additions for first five years, the bonus i.e. participation in profits starts from 6th year and paid as per the policy terms
Surrender Value : LIC, much like in other products, offers here also either a Guaranteed Surrender value at 30% of all paid premiums or a higher special surrender value as per its discretion. The only difference in this product is that guaranteed additions are also paid along with this surrender value and the company gives an option to the policyholder to utilize these proceeds to purchase an annuity (Immediate or Deferred).
Returns in New Jeevan Nidhi-The net returns in traditional products are lower or at best equals inflation due to the cost associated. In this product also the net yield to investors is not very high which is surely a deterrent for accumulating a good corpus.
IRR as per LIC New Jeevan Nidhi Illustration
Annuity payable for life based on above illustrated corpus at vesting age
The net return to the policyholder is not even matching inflation of 6- 7% which has been the case with most traditional products. Isn’t it a much higher risk than investing in equities through SIPs where you are able to generate returns higher than inflation
Best Option- Term Insurance + SIP
Split the same amount of INR 4121 into:
- Premium for Term Insurance of 1,25,000 is Rs.721/-
- Remaining into Systematic Investment Plan(SIP) i.e Rs.3400/-
Now Rs. 721 p.a.will take care of insurance cover of 1.25 lacs for next 25 years. While Rs. 3400 will provide better corpus & liquidity.
See what happen if you have invested same 3400 p.a. into mutual fund from year 1991 onwards up till year 2015:
The amount would have become INR 10,00,000+.
Think before you invest in Traditional Plans !!