LIC Jeevan Kiran Plan Review: Good or Bad?

If the Policyholder is not satisfied with the “Terms and Conditions” of the LIC Jeevan Kiran policy, the policy may be returned to the Corporation within 30 days from the date of receipt of the electronic or physical mode of the Policy Document, whichever is earlier.

Under Regular Premium payment, the LIC Jeevan Kiran policy can be surrendered by the Policyholder at any time during the policy term provided two full years’ premiums have been paid.

Under Single Premium payment, the LIC Jeevan Kiran policy can be surrendered by the policyholder at any time during the policy term.

The Surrender Value payable under the LIC Jeevan Kiran policy shall be higher of the Guaranteed Surrender value (GSV) and Special Surrender Value (SSV).

• Option to receive Maturity Benefit / Death benefit in installments over a period of 5 years instead of lumpsum.
• Tax benefit for premium paid & benefit received.

• No Loan will be available under the LIC Jeevan Kiran plan
• No loyalty addition or bonus under the LIC Jeevan Kiran plan

In order to check the suitability of the LIC Jeevan Kiran Plan, let us work out the Internal Rate of Return (IRR). Under the LIC Jeevan Kiran plan, you pay a premium for life cover and if you survive the term, then you receive the maturity benefit. Basically, the premium paid by you is returned on survival. Literally, there is no value addition under the LIC Jeevan Kiran plan. Now, using the figures given in the policy brochure let us work out the IRR of LIC Jeevan Kiran.

A 40-year-old male buys LIC Jeevan Kiran Plan for a Sum assured of ₹ 50 Lakhs. The policy term and premium paying term is 20 years. The annualised premium is ₹ 48,004.

If he pays premium regularly, he receives the maturity benefit at the end of 20 years. Here, he receives ₹ 9,60,080 as maturity benefit. The IRR for this cash flow is zero as there is no other added benefit in the LIC Jeevan Kiran plan.

You get a life cover for the LIC Jeevan Kiran policy term and the premium is returned on survival. By analysing the Cash-flow, we found that the internal rate of return (IRR) on investment is Zero. For life cover, a pure-term policy serves the purpose. LIC Jeevan Kiran Plan charges you a higher premium just to return the premium at the end of the policy term.

Buying LIC Jeevan Kiran just to get life cover is not advisable. Instead of that, you can look for a pure-term life insurance policy. Under a pure-term life insurance policy, you get a life cover for the premium paid and nothing is returned if you survive the term. But the premium for the same is low compared to the with-profit policy or return of premium policies.

The premium for a pure term life insurance policy for a sum assured of ₹ 50 Lakhs would cost ₹ 12,100. The Policy term and premium paying term are 20 years. For the same metric, in the LIC Jeevan Kiran illustration, the premium is ₹ 48,004. By opting for pure term life insurance, you could save ₹ 35,904 p.a. This amount could be invested as per your risk tolerance.

Here, we have chosen one debt instrument (PPF account) and one equity instrument (ELSS Fund) for investment. The pure term insurance premium is paid first and the balance could be invested.

At the end of 20 years, the maturity value under PPF account is ₹ 15.93 Lakhs. The IRR for Pure term life insurance along with PPF investment results in 4.61%.

At the end of 20 years, the maturity value under ELSS fund is ₹ 28.97 Lakhs. This is pre-tax value. The post-tax value is ₹ 26.89 Lakhs. The IRR for Pure term life insurance along with ELSS fund results in 9.04%.

By investing your surplus in alignment with these goals, you pave a smoother path to accumulating wealth effectively. However, trying to combine insurance and investment can be likened to mixing oil and water – they just don’t blend well and can often leave you in a deficit.

So, it’s crucial to separate these two aspects to make the most of your financial journey.

Final Verdict on LIC Jeevan Kiran Plan: Good or Bad?

In wrapping up our analysis, it’s clear that LIC Jeevan Kiran primarily serves the purpose of providing life cover, and little else. While the return of premium at maturity is touted as a major advantage by LIC, the reality is that this comes at the cost of a higher premium due to high agent commission. It’s a bit like paying a premium price for a basic service that doesn’t offer much in return. Our IRR analysis reveals that the percentage-wise return is negligible, making the higher premium seem less justified.

When it comes to life protection, opting for a pure-term life insurance policy emerges as the smart choice. It offers high coverage at an affordable premium, ensuring you get the most value for your money. On the wealth accumulation front, diverting the extra premium you’d pay for LIC Jeevan Kiran towards a diversified investment portfolio tailored to your goals, time horizon, and risk profile can be far more rewarding.

Don’t base your opinions solely on information from social media platforms like Quora, Facebook, Twitter, and the like. Remember, a Certified Financial Planner (CFP) can be your guiding star in this financial journey. They can assist you in crafting a goal-based financial plan, helping you choose the right mix of investments and insurance products that align with your needs and aspirations.

So, make informed decisions and set yourself on a path towards a secure and prosperous financial future.