LIC comes with a new Guarateed Insurance Plan – Jeevan Vriddhi

March 6, 2012   ·   0 Comments

Life Insurance Corporation of India (LIC) has launched a new Guaranteed Insurance Plan – Jeevan Vriddhi, showing why it is ahead of the other market insurance players. In the time when most people are looking for single shot option of saving their tax under 80C, Jeevan Vriddhi  is a case for demolish the believe that insurance is only meant for buying coverage against uncertainties. Will you Buy it?

Insurance Component with LIC Jeevan Vriddhi:

It is a single premium traditional plan offering guaranteed maturity sum assured (SA) along with loyalty addition (if any) after completion of policy term which is 10 years.  The guaranteed maturity SA will depend on the age of policyholder from eight to 50 years; it reduces with age.

The insurance component is fixed at five times the premium excluding extra premium (based on one’s health) and service tax. In short, the plans works like bank fixed deposits along with insurance thrown in to make it an insurance product.



http://stockssavvy.comFor younger persons, it would almost double your money in 10 years. With interest rates at its peak today, LIC is willing to offer good returns, but it is for the exact same reason the plan is available only for a maximum of 120 days.

The minimum premium is Rs 30,000, for an SA of Rs 150,000. If the policyholder dies during the term, the nominee will get Rs 150,000. If the policyholder survives till maturity, the guaranteed benefit will depend on the policyholder’s age at the time of taking the policy.

For example, if the policyholder would have paid single premium of Rs 30,000 (excluding service tax), for a child of eight the maturity amount will be Rs59,538. If the person is aged 35, the maturity amount will be Rs57,385. The return on investment (excluding mortality charges) will be approximately 7% p.a. in this case. If someone is 50 at the time of entry, the plan will give Rs 47,467 after 10 years.



If you a 25 year old person looking for above average assured return with decent life coverage, Jeevan Vriddhi is the scheme for you. This is a single premium policy which means that you will be required to pay premium only once. The minimum premium is Rs. 30000. If you pay Rs 1 lakh as premium for Jeevan Vriddhi policy with an intention to save tax under section 80c, you get an insurance of Rs. 5 lakhs which is not a very big amount. However, you get an assured amount of Rs. 200948.

It is important to understand two aspects of investments here. When you pay premium of Rs. 1 lakh, you will need to pay service tax of 10.3% on the premium amount which means you will need to pay Rs. 110300. But please remember that you will also save 30.9% tax on the premium paid assuming that you are in highest tax slab. This means actual premium paid will be Rs. 69100 plus service tax of 10300 which means total payment Rs.79400 and you get guaranteed return of Rs. 200948 in a period of 10 years. This means that you get return of 9.7% which is absolutely tax free. This is equivalent to a taxable return of 14.3%. Please remember this return does not include loyalty addition which LIC is promising to pay. This may further enhance your returns.

Let us understand all this with an example.

  1.              The life assured is of 25 years and is healthy
  2.              The life assured is under highest tax slab
  3.              There will be no change in tax policies in next ten years
  4.              Loyalty addition not considered

  •  Rate of return – For a 10 year policy term LIC’s endowment plan gives about 5% return on investment (excluding mortality charges). Jeevan Vriddhi plan will give approximately 7% (age 35 years) and hence a good option.
  •  Loan – The product offers loan after completion of one policy year, which will be 70% of the surrender value. Unfortunately, the rate of interest will be 10.25% p.a. instead of 9% p.a., which LIC is offering for most of the other plans.
  •  Surrender value – The guaranteed surrender value will be available after completion of one policy year; it will be 90% of single premium excluding any extra premium. LIC may pay special surrender value which will be discounted value of the guaranteed maturity SA as on the date of surrender.
  •  Loyalty addition – Depending upon the company experience the policy may pay loyalty addition. This is non-guaranteed and considering the decent guaranteed returns offered by the plan, it will be prudent to not have high expectations of the loyalty addition.
  •  Rebates for higher single premium – For single premium of Rs50,000 to Rs99,000, the increase in guaranteed maturity SA will be 1.25%; premium of Rs1 lakh and above, the increase will be 3%.


  •  While the plan will offer surrender value after one year, the special surrender value is not guaranteed to be paid. The guaranteed surrender value will be much less than what a person can get from premature withdrawal of bank fixed deposits.
  •  The policy term is fixed and so is SA. This is not a product for someone looking for high insurance cover or longer policy term.
  •  The death benefit is five times the premium excluding extra premium that may be payable if the person is not in good health. This could lead to issues with tax exemption. The product is better suited for those who are considered as ‘standard’ health.

In case you want to buy LIC Jeevan Vriddhi Policy, you can get in touch with us through Contact Us.

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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