LIC Jeevan Saral Review: Shall You Buy it or Not?
LIC Jeevan Saral is one of the most popular and well known plans of Life Insurance Company of India (LIC). This LIC Jeevan Saral review is for the existing as well as would be customers of this insurance plan. Agents are coming to you for selling this plan to you but you want to do some research first, right? So, read this review to make your conception clear about Jeevan Saral plan.
I have tried to write this plan as naturally as possible with both good and bad of this plan. I think after reading this review you shall have clear idea and you shall be able to make the decision of buying or not buying or even surrendering or not.
What is LIC Jeevan Saral Plan?
LIC Jeevan Saral is an endowment policy. The main features of this policy are as follows (I am using some technical terms which I will explain to you, wait guys!):
1) 250 times insurance cover of monthly premiums.
2) The death benefit of this policy is Sum Assured + Total premiums paid + loyalty addition if any.
3) The survival benefit of this policy is Sum Assured + loyalty addition.
4) After 3rd year, the policy can be partially surrendered.
5) You can surrender fully after the 3rd year.
6) The premiums paid and the maturity amount is totally free from income tax as according to the 80C section of IT act.
7) Loyalty addition will be added after 10th year.
OK, ok I am now going to explain what all these obscure terms mean in simple language.
What are Sum Assurance and Loyalty Addition?
Sum Assurance is the money LIC guaranties to pay after maturity or death. What would you get can be much more than sum assurance but extra amount is not fixed or guaranteed.
For example if your age is 25 and you pay Rs250 per month as premium then your Sum Assured (SA) will be Rs.62,500 for a 15 years Jeevan Saral policy.
Loyalty Addition is the bonus amount which you shall get if you drag your policy for at least 10years. There is no fixed rate of this bonus. It will depend upon LIC’s business.
So, Is Jeevan Saral is a Good Policy?
Jeevan Saral is an Insurance plan with investment. If you need to have a small insurance cover with a bit of money return than you can go for this plan. It will help you to save income tax. All the premiums paid will be exempted from income tax. The maturity amount is also free from income tax. Let us clear about the income tax thing and Jeevan Saral.
Income Tax Saving in LIC Jeevan Saral
One of my friend’s uncles has a Jeevan Saral policy. He said to me that it is 100% tax free. That means “If you pay Rs.5000 premium you shall save income tax of Rs5000”!!! Does anybody of you have such misconception?
No, you shall not get Rs.5000 income tax free; you shall get Rs.5000 tax free money. That means you shall not have to pay income tax of firstname.lastname@example.org% = Rs515.
You shall have to keep it mind that to be tax free you shall have to pay at least 5 annual premiums because your SA should be at least 20% of annual premium to be tax free. So, if you surrender before paying the 5th premium you shall have to pay the previous year’s income taxes.
Is LIC Jeevan Saral is a Good Investment?
I know, most people purchase LIC policies as good investments. But it is wrong. Jeevan Saral is not very good for the sole purpose of investing. You can subscribe to it as an insurance security plus investment. But it is not good for making somebody rich.
“Hey what are you saying? The agent has just shown me that I shall get return at 10% and you are saying that it is not good as investment?”
I know, because many agents have done same thing to me too. But, my friend, this chart with 10% return is not reality. LIC explains to you by this chart that how much money you shall get if ever they can give you returns @10%. The LIC policies never gave more than 5.5-6.5 % return in the past and naturally, it would be similar in the foreseeable future.
How Much Maturity Amount will I Get from LIC Jeevan Saral?
Mr. Vuni has a Jeevan Saral policy in which he have to pay Rs 1000 per month as premium, Sum Assured after maturity was Rs.3,00000 and the policy tenure is 21 years. So, how much will he get after continuing the plan for 21 years.
He will get the SA+ Loyalty Addition.
The SA for 21 years is 300000.The Loyalty Addition after 11+ years was 300 per 1000 of SA in 2012. We assume that the loyalty addition would be same.
So, after 10 years he will get 300000+300*300= 390000. So, after paying a total premium amount of 252000, he will get Rs.390000 after maturity. It is equivalent to 3.9% compound interest. It is not good.
Shall You Invest in LIC Jeevan Saral
If you are uneasy about term plans then you can go for LIC Jeevan Saral as an insurance product because otherwise you shall not have any insurance cover for your families. Most of the Indians do not like the idea of not getting any money return and for them Jeevan Saral is good. If you need it as a pure investment product, then, I think it would not be that good whatever the agents say. Besides, our Government uses the money from LIC for different purposes for the sake of people. That is why buying LIC policies are good for our country. As Jeevan Saral has the highest rate of commission, you can save the family of the LIC agent buy buying LIC Jeevan Saral policy. Now, what you will you do?