Hello Sir,

I am 32 years and have a 1 year old kid. My friend who is a LIC agent, suggested to me take LIC Jeevan Anand. What would be your advise?

Shall I go ahead with this plan or is there any other alternative available?

SRIKANTH SHANKAR MATRUBAI  advised :

At first glance, Jeevan Anand looks attractive. All insurance policies look great while buying and look quite meagre when you receive it.

Please run...run...run away from your friend.

Obviously, it is advisable to check whether your friend has any formal Financial Planning Qualification. Is he acting like a Agent or advisor?

Is he able to asertian your Human Life Value?

Has your friend himself invested in this Policy? (This is the easiest way to find out whether he is fooling you).

Well let me also tell you, your friend may be genuinely interested in helping you....LIC brainwash all the agents and made them believe they are selling GOLD for copper price. The problem is these agents do not adequate Financial Planning knowledge.

FIRST THINGS FIRST :

Before taking any insurance, please answer the following questions yourself :

1. How much insurance you need

2. How much insurance you already have

3. How safe is your job/income profile

You have to answer all these questions faithfully and then decide on the quantum of insurance cover you require.

No one should buy more than what is required or buy less than what is needed.

If you are already not covered, the BEST INSURANCE WOULD BE A TERM PLAN.

I have come across many people who buy from Insurance from friends/relatives have hid the Policies even from their family as it is extremely difficult for them t accept that have been fooled.

WHAT IS LIC JEEVAN ANAND?

This Jeevan Anand is whole life plan. It means the life cover is available even after the maturity period of the policy for the sum assured.

The Sum Assured along with the vested bonuses is payable in a lump sum on survival to the end of the term. An additional Sum Assured is payable on death thereafter.

Benefits in case of death during the selected term:

The Sum Assured along with the vested bonuses is payable on death in a lump sum.

Benefits in case of survival to the end of selected term:

The Sum Assured along with the vested bonuses is payable in a lump sum on survival to the end of the term. An additional Sum Assured is payable on death thereafter.

Accident Benefit:

An additional Sum Assured (subject to a limit of Rs.5 lakh) is payable in a lump sum on death due to accident up to age 70 of life assured. In case of permanent disability of the life assured due to accident this additional Sum assured is payable in instalments.

Illustration 1
Age at entry: 35 years
Sum Assured: Rs.1,00,000/-
Premium Paying term: 25 years
Mode of premium payment: Yearly
Annual Premium: Rs. 4,535 /-

 * In addition to the benefits given in the column, an Accident Benefit of Rs. 1,00,000 /- will also be available without payment of extra premium in case of death/disability due to accident

 ** Benefit payable on death after the selected term. If the death occurs due to accident up to age 70 an additional Rs. 1,00,000/- will also be paid.

(i) The above illustration is applicable to a non-smoker male/female standard (from medical, life style and occupation point of view) life.

(ii) The non-guaranteed benefits (1) and (2) in above illustration are calculated so that they are consistent with the Projected Investment Rate of Return assumption of 6% p.a.(Scenario 1) and 10% p.a. (Scenario 2) respectively. In other words, in preparing this benefit illustration, it is assumed that the Projected Investment Rate of Return that LICI will be able to earn throughout the term of the policy will be 6% p.a. or 10% p.a., as the case may be. The Projected Investment Rate of Return is not guaranteed.

(iii) The main objective of the illustration is that the client is able to appreciate the features of the product and the flow of benefits in different circumstances with some level of quantification.

(iv) Future bonus will depend on future profits and as such is not guaranteed. However, once bonus is declared in any year and added to the policy, the bonus so added is guaranteed.

BONUS:

The Bonus is NOT guranteed. It depends on the returns generated by LIC's investments.

What LIC gives as Bonus is not like your Salary which you go and spend in a Mall. LIC gives what it calles Simple Reversionary Bonus.

And....the Bonus the LIC declares is not given to you now, nor is it given if you surrender your plicy, but is given ONLY on maturity or on Death.

For Ex: LIC recently gave Bonus ranging from 34 to 41 on the Jeevan Anand Plan. (Avg -37).

This means if you have a Rs.10 Lakhs Sum Assured Jeevan Anand, you would have got Rs.37,000 bonus (avg) which would be added to your fund value.

What is the value of 37,000 that you will get after 15 years ?

At a nominal discount rate of 10%, the value is Only Rs.7,181. How big is that ?

COMPARING JEEVAN ANAND WITH JEEVAN ANMOL

Policy Comparison for a 35 year old male.

Plan Name                          LIC Jeevan Anand                                                            LIC Anmol Jeevan I

Plan Type                            Endowment                                                                       Term Assurance

Sum Assured                     Rs. 10,00,000                                                                      Rs. 10,00,000

Premium Amount           Rs. 79,911                                                                            Rs. 3,841

Death Benefit                   Sum Assured plus Bonuses                                         Sum Assured

 Maturity Benefit             Sum Assured plus Vested Bonuses                                Nil

Riders                                   Accident Benefit                                                                  NA

For 35 year old male, 10L sum assured, 15 years term plan, the premium is 79,911.

Same 35 year old male, 10 L sum Assured, 15 years in LIC itself (LIC anmol jeevan), the premium would work out to Rs.3841.

The difference is a huge huge Rs.76070. The amount over a period of 15 years even at a conservative return of 10% would work out to more than Rs.24 Lakhs.

Take a Term Plan and have all the money in the world to accumulate your own retirement and give BONUS TO YOURSELF!!!!!!

Why do you need LIC to declare anything?

If you see the chart given here...

If the LIC manages to generate 10% return, then the policy holder receives Rs.2,41,000 which in effect gives a return of ......just...5.8% compounded. Meagre, meagre returns, especially considering the long time frame where you have invested.

And, my friend, LIC itself says..............

"These assumed rates of return are not guaranteed and they are not upper or lower limits of what you might get back as the value of your policy is dependent on a number of factors including future investment performance. Future bonus will depend on future profits and as such is not guaranteed. However, once bonus is declared in any year and added to the policy, the bonus so added is guaranteed. "

FINALLY,

Even respected website like www.policywala.com has said in its review of Jeevan Anand :

"""On a simple note, you are not even getting double of your money after paying for continuously 25-30 years and the sum assured you will be getting after 25-30 years may seems high at present but think for next 45-50-60 years & think about the effect of inflation on the sum assured.

Insurance is an expense, not an investment. Go for Term Insurance Cover. Invest the difference in premium in mutual funds, it will give you far higher returns."""

It makes no sense to commit 4 Lacs per year for 15 years to get something like 70 Lacs after 15 years. Also if for some reason, you can't pay after 5 years, you will only get back what you paid in premium minus commission.

Jeevan Anand is meant to make Jeevan of insurance agent Anand at the cost of investors..

Insurance is not Investment. Go for PURE TERM COVER. The difference in premium if invested in mutual funds will give you far higher returns. Remember your insurance agent gets 35 to 40% commission on your first premium.

Insurance is an EXPENSE, not an INVESTMENT. No amount of money put in INSURANCE will make you richer or recover the loss suffered by your dependants in your absence. As policy holder if you receive any money from Insurance - you are a loser because you have taken a policy which is costlier than a basic term cover. As nominee if you receive money - you are the biggest loser . What you receive from insurance will only give you temporary relief. The best thing for a nominee is the policy holder staying alive and earning well. So do not look for returns when you are choosing an insurance policy. As policy holder look for the least premium payable per lakh of sum assured. Best & cheapest is PURE TERM COVER.

Instead always go for Mutual Funds. Even Mutual funds do offer you Life Cover. Do consult your Financial Advisor before investing.

Best of luck,

Srikanth Shankar Matrubai

P.S.

FREE advice can be expensive and a good paid advice will earn you money  from the savings itself. LIC agents offer lot of free advices and also give you expensive plans.

I do receive commission from insurance products. But I don't sell insurance products for earning commission. This is big difference. I stay independent but I do sell service and products in customer's interest.