This post is a review of New LIC policy Jeevan Utkarsh. You may be wondering whether this insurance policy is a right choice to you. The insurance agent must be trying hard to sell you but you want a second opinion. In fact, you want to understand the positives and negatives of this policy. I do understand that an agent always tells good things about the insurance plan. The main purpose of the agent is to sell the policy. So, the agent would focus on the tax saving features of the policy. But, do you buy an insurance policy to save tax? If yes, you need to rethink over it. The insurance policy should be bought to get insurance, nothing else. However, Let me start with the basics.
Must Read: LIC Jeevan Utkarsh Features
Why Do You Need an Insurance Policy
Your reading this Jeevan Utkarsh review so that you can take a right decision. But before that, you should be clear about your objective.
An insurance policy is required to deal with any sudden financial loss. This loss may be of your house, car, shop or earning family member. An insurance policy tries to cover the loss. Thus, when you go to buy an insurance policy, the protection should be your primary concern. You must choose a policy which gives the best protection at a low cost.
The insurance products were not designed to save tax. Rather, it is the government which gives you the benefit of tax deduction on insurance. The government does this to promote insurance. Hence, any life insurance policy of any company would give you the tax benefit. Besides life insurance policies, Mutual funds, FDs and post office saving schemes also gives you the tax benefit.
An insurance policy is not an investment product. But to make the insurance more lucrative, companies started to mix investment with the insurance. People liked such products because of the maturity amount. Later, insurance companies focused only on the mixed product. There are very few pure insurance schemes.
Now, most of the people consider insurance policies as an investment product which gives tax benefit. The protection is a secondary and often ignored.
So, in the above context, you have to assess the LIC Jeevan Utkarsh. Of course, every person has unique needs, hence this policy can be useful for some people.
Jeevan Utkarsh Review Through Questions
In this post, I am going to answer the probable questions. These answers would certainly help you to decide. In these answers, I would review the Jeevan Utkarsh.
How much Insurance Cover Would I Get?
Since Jeevan Utkarsh is an insurance policy, your first question should be about the insurance cover. As you must know that an Insurance policy must give you the protection. So Let me tell you that LIC Jeevan Utkarsh gives you insurance cover which is 10 times of the premium(excluding taxes). Suppose, your premium is 80,000 then you would get an insurance cover of ₹8 lakhs. You may also get loyalty additions if any. The policy gives some amount as loyalty additions if LIC earns well.
Suppose, your premium is 80,000 then you would get an insurance cover of ₹8 lakhs. You may also get loyalty additions if any. The policy gives some amount as loyalty additions if LIC earns well.
Would I need an Insurance Further or It is sufficient?
We need life insurance cover to mitigate the financial loss due to the death of the breadwinner. Hence, the insurance coverage must be sufficient enough so that family can sustain without the deceased person. As a thumb rule, the insurance coverage should be 10 times of the policyholder’s annual salary. Thus if you are earning 8 lakh per year, your insurance cover should be at least 80 lakhs.
In the case of LIC Jeevan Utkarsh, you would not be able to afford enough insurance coverage. Because to get proper insurance cover, you have to spend whole one year earning. It means, to get sufficient coverage, you would also need a cheaper term insurance plan.
The term insurance can give you insurance cover of 1 crore on annual premium of about 15,000 (30-year, healthy person). So get ready to have a second insurance policy if you buy Jeevan Utkarsh.
Will Jeevan Utkarsh Give Insurance Coverage Till The Age of 60?
The LIC Jeevan Utkarsh is a short duration insurance policy. It is only for 12 years. The duration of policy is only 12 whether your age is 6 years or 47 years. This plan would last up to the age of 60 years if you take it at the age of 47 years. But, for younger people, LIC Jeevan Utkarsh would leave you uninsured after 12 years. You would need another insurance plan for remaining years. It would become very costly at an older age. The high cost may deter many people to go for life insurance at the age above 55.
It would be better If this plan would have been at least for 30 years.
Can I Save Tax
The LIC Jeevan Utkarsh also gives tax deduction like all other life insurance policies. You get this tax benefit under section 80C of the income tax act. Besides life insurance, PPF, EPF, ELSS, Tax Saving FD, NSC and tuition fees also give tax deduction under section 80C. These plans don’t give insurance coverage but you can get it separately through the term insurance.
The maturity amount of LIC is also tax-free. EPF, PPF, and ELSS also give tax-free maturity amount.
Can I lose My Investment?
You may find that LIC Jeevan Utkarsh is a right policy to get insurance coverage. But, since it is also an investment product, you should also assess the return and risk of the assessment. The policy gives you a guaranteed basic sum assured. Thus, you can be tension free.You would not lose money. Certainly, you would get back your money along with the interest. Also, the government of India takes responsibility for the LIC policies. Hence, you can be assured of the safety.
What Would be the Rate of Return
There are various schemes and plan which promise a good return on investment. Then, why LIC Jeevan Utkarsh? Do it give a better return than EPF, PPF, NSC or FD? We can easily compare these investment products by going through the interest rate. But, unfortunately, we never know the interest rate of LIC policies. Insurance companies never tell return rate of its policies. It is up to you to find out the rate of return. That is why the review of LIC policies becomes difficult.
In fact, finding out return rate of LIC policies is very difficult. You can calculate the interest rate by using the basic sum assured and premium amount. But it would not tell you the complete picture as LIC also gives a bonus. The rate of bonus is also not fixed. It depends upon the performance of LIC Fund. In this case, I would calculate the rate of return of the assured amount. There would be loyalty additions as well but It would not be a big amount. The LIC had shown following benefit illustration in the Jeevan Utkarsh Brochure.
Recommended: Premium Calculator of Jeevan Utkarsh
LIC’s Jeevan Utkarsh Particulars Age At Entry 25 Policy Term 12 Mode of premium payment Single Tabular Single Premium(Rs.) 41242 Single Premium Paid 41242 Basic Sum Assured 75000 Sum Assured on Death 412420
Variable scenario 1:Gross Investment return @4%p.a.
Variable scenario 2:Gross Investment return @8%p.a.
End of Policy Year Total Premium Paid till end of year Amount Payable on Maturity Guaranteed Variable Total Scenario 1 Scenario 2 Scenario 1 Scenario 2 (1) (2) (3) (4) (5) (6)=(3)+(4) (7)=(3)+(5) 12 41242 75000 0 4875 75000 79875
*The Single Premium shown above is exclusive of applicable taxes, extra premium and rider premium, if any
The Above tables are given in the Jeevan Utkarsh Brochure. But, This table does not give you a fair idea about the rate of the return. In fact, It is very difficult to find out the rate of return from the endowment plans of LIC. As LIC never tells the amount used for investment and life cover separately. Therefore, to find out the cost of life cover, I have to use a long route. After some assumptions and calculations, I could get the cost of Life cover. It is 4104 for whole 12 years.
You can read whole calculation
I have considered the LIC e-term plan for life cover. It is the online term plan from LIC. Anyway, If you want the sufficient insurance cover, you have to buy a term plan. I assume that a person who is considering to buy the costly Jeevan Utkarsh must be earning at least 5 lakhs per year. Thus, He/she requires an insurance cover of ₹50 lakhs. For this amount, he has to pay ₹5723/ year premium. Now suppose, the person increases sum assured by 4,00000. In such case, he has to pay 6181/year. It means for extra 4 lakh sum assured, you need to pay extra ₹458/year.
Since Jeevan Utkarsh is a single premium plan, we have to also covert this ₹458/year to single premium. I have used the Present value formula at the rate of 6.5% interest to get the value. It is ₹3980. It means LIC gives the insurance cover of ₹4 lakhs at ₹3980. For 4,12,420, it should be about ₹4104.
We can deduct this amount from the single premium of LIC Jeevan Utkarsh Policy premium. Now, the premium for investment would be ₹38,994 (including GST). Using this amount, we can calculate the return of LIC Jeevan Utkarsh.
Elaboration of Above Table
Let me elaborate above chart for you. If you (25 years) buy LIC Jeevan Utakrsh and choose basic sum assured of ₹75,000, you have to pay single premium of ₹41,242. If you include tax It would become 43,098. But We have to deduct the cost of insuarance cover, which would be ₹4,104. Thus investment prmium would be ₹38,994.
Your Invstment of ₹38,994 would give guaranteed return of 75,000 after 12 years. You may get extra ₹4875 if LIC Fund earns 8% return on this investment during the period. if It gets only 4% return, you would get only 75,000.
Using Excel function ‘RATE’ You can find out the rate of return on this investment. So, now you know the rate of return in both the scenario. It is ₹5.6% if first scenario and 6.16% in second scenario.
Of course, the rate of return is low. Other tax-saving options such as NSC, PPF, EPF, and SCSS give far better return than this. However, let me clarify, that interest rate of PPF, NSC, and SCSS is reviewed every 3 months. EPF also fixes interest rate every year. Thus, return from these investments may also go down.
Is not it convenient to have insurance and investment scheme together?
Of course, it is convenient if you get the benefits of both the world in one policy. But, you are not going to have only this policy. As the short duration and low life cover would force you to buy another life insurance policy. In fact, life cover from the Jeevan Utkarsh would not be significant. You have to plan it separately. Thus, you should consider it as an investment plan.
That is why the LIC Jeevan Utkarsh should be compared with the other investment plans which give us tax benefit.
What About Settlement Plan
The LIC is giving settlement plan in The Jeevan Utkarsh Policy. Let us review this plan as well. This plan gives you an option to defer your claim amount. Instead of taking whole amount lump-sum, you can take it in the installments. Withdrawing money in installments can be beneficial if you don’t need full amount immediately. It would be particularly helpful if you want to pay higher education fees from the claim amount. By taking the amount in installments, you can avoid useless expenditures.
However, LIC is not declaring the interest rate in the beginning. It would be told later. If the interest rate of LIC is competitive, it is a good option. LIC can easily add this facility with all of its policies.
Well, there are other options to receive payments in installments. You can use multiple fixed deposits to get money in installments. Also, Systematic withdrawal plan of the mutual fund can be used to get money monthly, quarterly or yearly. Debt mutual fund which invests in government securities are as safe as a fixed deposit.
Can I withdraw Money before maturity
Yes, you can withdraw money by surrendering the policy. However, It is not possible until initial 5 years. After this period, you can surrender policy but you would get a reduced amount. Even, you are not going to get your invested amount. The LIC would give you the 90% of the premium amount excluding taxes. However, LIC May give some extra amount which would be declared in future.
How Much Commission Do Agent Get
I have said that this LIC Policy gives a comparatively better return. It is possible because of the low agent commission. In a single premium policy, LIC agents get only 2% commission. That is why This policy is given more than 5% return. Otherwise many LIC policies don’t even exceed 5%.
Why Should I buy LIC Jeevan Utkarsh Policy
You should buy LIC Jeevan Utkarsh policy, If you can’t go to the post office or bank to open a PPF account, NSC or Sukanya Samridhi Account.
The Jeevan Utkarsh Policy may be suitable if you don’t rely on term plans.
You should buy LIC Jeevan Utkarsh If you can’t afford to upset the LIC agent.
Is there any better plan instead of this scheme
You would be better off if you don’t mix insurance and investment. The separate plan would be more transparent and cost you less. For tax saving and growth, you can choose from ELSS, PPF, NSC and tax saving FD.
Whereas for life cover, you can go for the pure term insurance plan. The online term plan is very cheaper.
I hope my review of LIC Jeevan Utkarsh would help you in taking the right decision. You can also read about some other LIC policies and their review. Keep Reading.
Other insurance plans of LIC
LIC Jeevan Umang Policy – LIC Jeevan Umang is the Whole life endowment insurance plan. It is a limited premium policy and covers you till the death.
LIC Online Term Plan e-Term – It is a basic term plan which gives only death benefit. Premium is very low.
LIC Bima Diamond Plan – It is traditional money back insurance plan launched for diamond jubilee year of the LIC.
LIC New Jeevan Anand Policy (Plan No 815) Features – It is whole life endowment insurance plan
LIC Aadhaar Stambh and LIC Aadhaar Shila – It is common endowment insurance plan with a low basic sum assured.
LIC Jeevan Labh Policy (Table 836): Features, Benefit, and Terms – It is a fixed tenure traditional endowment insurance plan