According to me, one should never go to this plan at all. This is one another fooling plan proposed by LIC. I will soon tell you why. Only LIC agents would have proposed you this plan. These days, the agents have developed too much that they propose a composite plan out of existing plans and portray as if their plan is good.
I too got into the trap and lost Rs.65000 last year. My agent proposed a composite plan, having 21 plans of this kind (Jeevan Anand) which starts maturing 25 years. That is, one matures at 2034, the next one at 2035, and next one at 2036 etc and it goes till 2055 I guess. (Sorry, I am a bit lazy to propose you the exact number). I believe you know what the plan covers etc.
For my age (22 now), I have to pay around Rs.2500 per year for 35 years to get 1L worth policy. (For sake of simplicity, I am not taking policy maturing in a sequence of year). If I take 20 such policies, all of which matures in 35 years, I will get a coverage of 22lacks. Consider the following scenarios -
1.I die before the policy matures.
Benefits: I will get the 20L plus the bonus acquired (around 10K probably)
2. I survive till the end of the policy.
Benefits: I will get 20L sum assured + 10K bonus (approx.) + 20L when I die.
Totally: 40L + 10K (approx)
3. I am not able to pay the premium because of personal reasons (after 10 years say)
Benefits: I believe you will get one third of what you paid excluding your first 3 payments.
You would have got 1.16L at the end.
Now consider this case,
If I get pure life insurance I need to pay around Rs.6500 now for this age of 22 (LIC’s Amulya jeevan). The risk benefits is 25L. I deposit the rest amount (Rs.43000) in FD which pays 8% premium. If you want to avail tax benefit, you can choose NSC/PPF etc which also provides the same interest. Reconsidering the above 3 cases,
1. I die before policy matures:
Benefits: I get 25L completely from my life insurance +
All the money I have in FD (Rs.43000 per year)
2. I survive till the end of the policy (35 years):
Benefits: Rs.0 from my life insurance.
My FD amount would have become 79.98L at the end of 35th year.
3. I am not able to pay the premium
Benefits: My insurance expires
I would have had 6.7L in my FD itself.
Moreover I dont believe you wont be able to pay a meager Rs.6500 per year to keep your policy active.
In all the 3 possible cases, my 2nd plan works out way better than this stupid jeevan anand plan. Everything in this life is math. Do your math and play intelligently. I have wasted Rs.65000 last year, and I have discontinued this time. I am a stock market investor. I want to cut losses than making profits in general. I know I did something wrong in first place by taking the policy. Now I dont want to suffer further losses. Take your own call.
Note: Though I have no knowledge about commission details of LIC agents, I am sure they will be getting lot more. I first lost money from one of the agents and then I went to another agent for pure life coverage scheme which doesn’t give any returns at all. He argued with me for more than an hour to choose the same plan again (I dint tell him that some other agent sold me this plan to me last year). I was well prepared with my numbers and so he was not able to brain wash me with his words. He showed as if I would get 7L per annum for paying 35K premium now. LIC has historically declared 4% to 4.5% bonus each year for this plan. He said the govt. will increase the bonus to more than 8%. I dont konw how this damn guy knows what even Mr.Pranab ji hasn’t decided.
Believe me, the bonus will not be compounded over the years.
Assuming the same figures given above, Rs.2250 which will be declared as bonus next year (assuming a liberal 4.5% bonus) will be the same Rs.2250 after 35 years. At 8%, it should have become Rs.33247 after 35 years, but it does not. That is the check.
I am in the highest tax bracket right now (30%), and so tax exemptions makes sense to me. But as per the latest tax changes proposed from 2011 onwards, I will be in 10% tax bracket only. So I dont want to take any heavy long term commitments till then as I need to understand the tax rules clearly before making my move.