LIC Jeevan Labh Plan : Reviews/Features/Return Sheet

The expected returns are in between 5.6% to 6.8%.

Similar to the earlier post regarding ‘LIC Jeevan Shikhar”, this plan i.e., LIC Jeevan Labh Plan also has a similar kind of offering.

LIC Jeevan Labh is a limited premium, non-linked with profit endowment insurance plan which was launched on 4th January, 2016 for the sole purpose of attracting individuals who want to avail taxation benefits. The plan is suited to those who want premium commitment for short duration having life coverage and benefits for a longer period.

The limited feature in this plan lets you chose among the three variants of policy terms (duration) i.e., 16,21 & 25 years and premium paying years are 10,15 & 16 respectively.

Features & Benefits:

Minimum Entry Age: 8 years

Maximum Entry Age: 59 years

Minimum Sum Assured: Rs.2,00,000

Maximum Sum Assured: No LIMIT

Policy Term & Premium Payment Term(years) : 16 (10years), 21(15years) & 25(16years)

Maximum age at Maturity : 59/54/50 years

Payment option Facility :3/6/12 months

Additional Premium Benefit : Optional Rider as Accidental Death & Disability Benefit

Term Insurance Rider Benefit : Increases the Death Benefit with sum assured

Loan Facility – Duration 3 years

Surrender Benefit – Post 3 Years of premium

Though the tenure is 16,21 & 25 years you need to pay premiums only for specific period

Maturity Benefit : Sum Assured + Bonus + Final Addition Bonus

Death Benefit : Sum Assured + Bonus + Final Addition Bonus Sum Assured (Not less than 105% of total premium paid as on date of the death occurred)

Commencement of Risk : Immediate

Fixed Premium Deduction every year

Grace Period : 1 month

Bonus Rates (per Rs.1000 Sum Assured) of LIC Endowment Plans are in the below range:

• <11 years - Rs34 • 11years-15years – Rs.38 • 16years-20years – Rs. 42 • >20 years – Rs.48

LIC Terminal Bonus Rates:

LIC JEEVAN LABH TABLE

Source : LIC Website

Illustration:

If a 35 year old individual opts for a sum assured value of Rs.2 lacs for term 21 years for a premium paying term of 15 years then after completion of 22nd year he would receive maturity benefit of Rs.4.21 lacs(Inclusive Sum Assured + Accrued Bonuses + Final Addition Bonus.

The expected returns are in between 5.6% to 6.8%.

Higher the Age — Higher Premium — Lower Returns

Lower the Age — Lower Premium — Higher Returns

LIC JEEVAN LABH RETURN

The main intension to buy Endowment plans is avail the money back option, risk aversion & insurance plus investment benefits. The combination of Insurance + Investment is not a good option to invest as you get minimum Insurance coverage & minimum return on Investments. Therefore before buying any endowment product, check for two most important things, insurance coverage on which all diseases & return on investment.

Hence, buying LIC Jeevan Labh Plan is not a right decision for people looking for more than 10% returns p.a on their investment, over a lock in period of more than 10 years.

Why NPS is not a good investment option

National Pension Scheme : Long Term, Illiquid, Taxable

What is National Pension Scheme?

Pension Scheme is launched by Government Of India where a particular amount is invested regularly till the age of 60 years and a lump sum is received at your retirement and a fixed monthly income for lifetime. Investments are market linked and asset classed are predefined by the government which are into government securities fund, fixed income instruments and Equity Funds.

NPS deductions comes under section 80CCC & gives deduction upto 1.5lac under the overall ceiling of section 80C. The only attraction of this scheme is that it gives an additional tax deduction of Rs. 50000 which puts the overall deduction upto Rs. 2 lacs This scheme is specifically designed for risk averse people, though the scheme is market linked but allocation of investment in the asset classes happens on the basis of your age. The more your age, the less weights of riskier assets will be applied to your investment giving you less returns.

Example : A youth aged 18 years wants to invest Rs. 1000 per month will have to compulsively invest for 42 years i.e., till the age of 60years.The Pension wealth on retirement would be Rs. 504000 and as per the rule 40% i.e., Rs. 201600 of the pension wealth is to be kept invested in life annuity on retirement which gives you less flexibility in your investment.This investment should be totally discarded by the youth.

NPS

Criteria & Issues of NPS :

Age Bracket of 18years to 55years

Minimum Investment : Rs.6000/year, Fund Management Charges : 0.009%

Risk option : Investment in Equity to the maximum upto 50% The older your age the less investment in Risk bearing products like Equity, Government securities, Corporate Debt etc which provides returns between 8-10%

Exit option : Withdrawal at the age of 60years but only upto an extent of 60%, rest 40% has to be invested in an annuity with IRDA.

Premature Withdrawal can be only at an extent of 20% of the accumulated savings rest 80% to be invested in an annuity.

The Withdrawal amount is taxable

Returns on NPS are not guaranteed and returns gained are taxed as capital gains

Funds change option is restricted to only once in a year

Investment Ratio Example : Mr. X aged 40 years wants to invest Rs. 10000 in NPS. Since his age is on a higher side the asset allocation will be as follows :

– Equity portion 40%, (Return : 12-14%)

– Credit Risk portion 25% (Return : 8-10%)

– Government Securities 35% (Return 6-7%)

So to average out Mr. X can achieve a maximum return of Rs. 1000 p.a at ROI of 10% p.a

In my opinion it is better to invest your hard earned money into Balanced Mutual Funds having both Equity & Debt option, Systematic Investment Plans, Employee Provident Fund which can be withdrawable after a period between 2months to 58years or in Equity Linked Saving Schemes, Bank Fixed deposits, National Saving Certificates etc which have a 3 to 5 year lock in period.

To conclude NPS is not a better investment option since there are far better investments than NPS which give benefits of less lock in periods, flexibility, taxation benefits, higher returns and many more.

PPF Rate Cut – Positive for equity and bonds

As the Indian economy is upwardly growing at 7.3% levels, the country is bringing efficient changes like Repo Rate Cuts, Interest Rate Cuts on Small saving schemes, introducing schemes and campaigns like JanDhanYojana, Pension schemes etc with a sole vision to build a high functioning economy focused on industry, innovation and entrepreneurship.

Union Budget 2016 announced PPF Rate cut of 60 bps i.e., from 8.7% to 8.1%, the highest reduction after 2004.The short tenure investments of 1yr,2yr & 3yr term deposits have reduced their interest rates as they have only 25 basis spread over comparable government securities rates.

How are the interest rates determined for such small saving government schemes?

The market determines the interest rate and government gives subsidy on its securities, including saving schemes.

So for example, the Sukanya Samriddhi Yojana and the Senior Citizens Savings scheme offer 9.2% and 9.3% rates respectively; the highest among the Small Savings schemes. They enjoy a spread of 75 bps and 100 bps over the rate of G-securities of comparable maturities.

As per information from the RBI, at the end of May 2015 deposits under all the savings schemes put together, totaled Rs. 6.28 lakh cr. This included funds & rates allocated towards Deposits, Certificates and the Public Provident Fund (PPF) schemes are as below:

Total Govt. Deposits

Rate cut updates

Source : Rbi.org

Since January 2015, RBI has cut the repo rate by 125 basis points but the banks have reduced the lending rates by maximum 70 basis points. In the previous rate cut of 50bps by RBI in September 2015, it had asked government to review the small savings rate on Post Office Schemes, National Saving Schemes, Public Provident Fund etc to encourage banking investments which will bring financial inclusion in the country and hence lead to more lending.

More Deposits = More Loans = More Credit Growth = Leads to Capital Formation

The current government initiatives like Make in India, Start up Stand up India, Digital India, Smart Cities Project etc where lending rates are required to remain low, rising deposit rates will make the economy sluggish rather than efficient. Therefore both are interlinked.

To attract long term investments, Tax free bonds are going to be the best thing going forward for long term savers and pensioners assuming the liquidity needs are not immediate.

What are the implications of a downward trend in the rates?

– Savers have to save more and spend less. Real interest rates are yet positive, a Fixed Deposit giving 7.5% interest per annum and inflation of 6% will compensate the individual with 1.5-2% gain but post tax gain can turn negative. Therefore, putting your money in tax free bonds, SIP’s etc will be a smart decision for an investor to attract real gains.

Lower Rates is a need for investment boom in the Indian economy to accelerate the Government initiatives like Make in India, Start up Stand up India, Digital India etc this will lead to higher GDP and more employment in the country.

Debt funds will gain as higher coupon bonds will not see negative price fluctuations.

Banks suffering from the NPA effect will be the biggest beneficiary as they can offer lower deposit rates thus improving their margins.

RBI can have further reduce repo rates provided the inflation meets the target as it was to maintain at 5.6% in December,2015

Therefore, the overall effect of this rate cut will lead to annual savings of approximately Rs.1250 cr to the government which will help in reducing the fiscal deficit and create investments in the field of innovation and entrepreneurship, promotion of investor confidence, job creation, development of infrastructure & achieving total digital connectivity.

LIC Jeevan Shikhar Plan : Tax Saver or Loser

As per the Insurance companies data it is said that 70% business is generated in the last financial quarter i.e., January to March where people want to save maximum tax by opting tax saving instruments.

LIC Jeevan Shikhar Plan is one of them mainly to target people who invest in tax saving instruments on the last call & end up paying premium due to lack of tax planning. It is a newly launched endowment plan (Benefit of Insurance and Investment) which is currently available for sale for a limited period between January to March, 2016 period.

How does Jeevan Shikhar work?

Features:

1. Minimum Entry Age: 6 years
2. Maximum Entry Age: 45 years
3. Minimum Maturity Sum: Rs.1, 00,000
4. Maximum Maturity Sum: No LIMIT
5. Premium Payment Mode : Single Premium Only
6. Policy Term : 15 Years

lic jeevan shikhar

LIC Jeevan Shikhar is targeting young individuals below the age of 40, Hence the below illustration is being taken of a 30 year old individual:

lic jeevan shekhar illusrtation

Negatives:

1. Long Waiting period : loyalty additions after 5 years of 15years policy term.

2. Loan granted in the policy term is 55% till 3RD Policy Year and 85% after completion of 13TH Policy Year.

3. Benefits of Loyalty Additions are variable depending upon the performance of LIC therefore assumed Loyalty returns at 10% are not guaranteed.

4. For Investment purpose, the policy should not be opted as it offers Return of 6.3% after 15 years of duration where a fixed deposit, PPF etc (safest & liquid investments) offers a higher return.

5. For healthy individual who pays more than 40% premium has received a sum assured of Rs.1 lac that too after 15 years. Even after considering Inflation at 5.5% constant for 15 years the future cost inclusive of inflation will be Rs. 98,505. Hence, it does not really matter if we invest Rs. 98,505 after 15 years because the value of the investment isn’t appreciating.

6. Any cancellation request will attract stamp duty charges, medical charges, service taxes, underwriting charges and proportionate risk premium for the period of cover.

Therefore to summarize Endowments policies should be opted carefully by going through a quick checklist i.e., returns, surrender terms, risk cover, tax coverage, bonuses, etc. To achieve your financial & personal safety goals wisely, better keep investment and insurance separate as per the analysis. There are many products available in the market which provide Insurance and Investments like Term Plan & PPF, Term Plan & ELSS, Term Plan & ELSS, Term Plan & National Pension Schemes, Term Plan & Tax Free Bonds etc which give better yields over the period of time.

Invest Smart and Safe

Protect a Lady by Gifting Health protection

It say’s “Family, Nature & Health all go together”, the three things which matter the most in an individual’s life especially in a women’s life who is gifted with inborn qualities of being kind, nurturing,brave,perfectionist,vivacious but at the same time she is delicate, sensitive who requires special care in her hectic lifestyle.

As per IRDA (Insurance Regulatory & Development Authority), India continues to have the highest levels of under-penetration in the world, with only 0.16% of the total population insured for health. Little wonder then that 70% of healthcare expenses are met from one’s pocket.

According to the 2015 survey by insurer ICICI Lombard, only 39% of the women are covered by proper Health Insurance. This also pointed out that women were prone to an increasingly succumbing to chronic ailments like anaemia, metabolic disorders, arthritis and cancer as compared to men. Of the 39% women who were covered, only 22% purchased policy by themselves while a large share around 63% was owned through husband or father with the rest sponsored by employer.

With the Government Program Initiatives like Indira Gandhi Matrtiva Sahyog Yojna, Indira Gandhi Maternal Relief Scheme etc., which has almost doubled the budget from Rs.230 crore to Rs.400 crore which compensates women who don’t receive maternity leaves. This initiatives gives relief on the monetary portion for a specific period at a later stage. But it does not relieves on huge initial costs like hospitalisation expenses, medicines cost, routine check-ups etc. which hence should motivate a women to attain a health insurance policy to protect against the initial monetary burden of the disease.

In low and middle-income countries like India which has 72.2% of village population, many deliveries occur at home without the assistance of trained attendants which increases the infant & maternal mortality rate. This is purely due to bad hygienic conditions, less infrastructural facilities, lower income, safety issues, less trained professionals etc. By protecting women by health insurance which compensates 50% of the monetary costs, women with less income will be facilitated to avail better facilities which will protect its overall primary health care.

In the current scenario of mental stress where a woman is demanded with multiple roles in her life being a supportive wife, a caring mother, a successful corporate leader or a successful businesswoman leads to increase in illness like Polycystic ovary disease, osteoporosis, Blood Pressure, Diabetes, Cancer at an age as early as 25 years and surprisingly less than 0.1% of the people opt for any health insurance facility at this age. Hence, this can be solved by availing a health insurance policy at an early age to benefit with maximum coverage and include critical illnesses which are not covered at later stages of age.

An illustration given below shows you the difference in medical premium between Family Floater or Individual Plan in accordance to the age of the family members.

Health Insurance

Source: Insurance Companies

This shows that a family floater plan will cost more with less coverage of illness vis-a-vis separate individual plans which customise as per your eligibility and requirements.

Therefore, to conclude it is of utmost importance to insure your health along with climbing up the pyramid in this challenging role of life to have a Wealthy and Healthy Living.

IS ZERO PERCENT IS TRUE OR JUST GIMMICKS

Nobody in the world gives anything as a charity to anybody without his / her own interest or benefit. Zero percent interest schemes are same. Normally on eve of any festival or for major stock clearances normally either manufacture or dealers launch such schemes for which they tie up with the banks/ NBFC’s for these types of schemes.

It is a major gimmicks and that the reason people should read the brochure very carefully before finalizing the option. Prices are always fixed for these types of schemes & companies / dealers do not allow any negotiation or cash discounts or any benefits in any other form of which a person paying in cash enjoys. Normally tenure of loans are almost fixed in some slabs & remains available from 3 months to 12 months for the small value items & up to 36 months especially for the high value house hold electronic and Furniture items.

How do these schemes work ?

Firstly these zero percent schemes have hidden costs inbuilt in them. Perhaps the biggest loss for you would be forfeiting the cash discount on a product that you could have otherwise got if you had bought it on full cash. This apart you will also be paying a transaction or processing fee under the zero percent scheme and consequently more money through advance EMIs.

For example, you decide to buy an Philips 40″ PFL3750 LED colour television that costs around Rs. 34,990. ( after Retailer discounts ) You decide to buy it using the zero percent finance scheme. Under this arrangement you will pay the entire cost in ten EMIs of Rs. 3490 for ten months. This works out to be Rs. 34,990 spread over 10 months. Now here’s how you end up paying more! To begin with you pay a processing fee of Rs. 1,000. And since you are buying the LED on a zero percent finance scheme you are not entitled to the cash discount of Rs. 8,000! ( Please check with snapdeal,PAYTM etc.. )

zero percentage

So here’s how it looks in the above example. The LED costs Rs. 34,990 ! Add up the Rs. 1,000 processing fee that you pay initially and Rs. 8,000 that was lost out on cash discount. A total of Rs. 9,000! This means you get a net finance of Rs. 25,990 only! Now you pay an EMI of Rs. 3,490 for 10 months which totals up to Rs. 34,990. So at the end of ten months you pay Rs. 9,000 more for what you got.

People can easily identify the hidden component of interest in these schemes by just calculating the price offered for spot payment (i.e. cash payment) & price offered for “ZERO INTEREST SCHEME” which is always the maximum price. Besides this, the interest is collected in the form of handling charges /documentation/services enabling charges & people remain unaware of these hidden charges. People should compare the payback period & amount payable in its comparison. It is always better to keep payback period minimum.

The RBI through its circular asked all banks to discontinue all zero interest EMI schemes on all retail products for violating the fair & transparency pricing practices, & because of which such schemes lowered significantly. Now those which are still continue are by tying up with NBFCs, because central bank has asked to discontinue such scheme & not the NBFCs.

The central bank has also asked such companies to bring more transparences in terms & conditions & total gross mount customer would end up making.

People should compare between consumer loan offered by the banks or finance companies & extended offer by manufacture or dealers & if possible people should prefer loan from banks than finance companies because of their transparency by & large extend & can be made accountable by RBI.

For high value loans such as car loans finance or banks check the CIBIL score of the customer which has to be very good i.e. 750 & above besides their other income criteria. This CIBIL & other conditions restrict large section of prospective buyers & only ten percent of the society become eligible for such schemes & those people can avail loans easily. For high cost items manufacturer incorporate the interest component in its sales price & in the form of significant amount of down payment collects it from the customer & pays it to the a banks or finance companies.