Hi !
It is my firm conviction that Insurance should form a part of every individual’s Asset allocation. A recent (and decent ) offering by LIC is a scheme called JEEVAN ANAND.
Jeevan Anand is a unique combination of ’’Whole Life’’ and ’’Endowment’’ type of policies with the obvious advantage of having to pay a lower premium. If a person took separate policies, it would work out costlier. However Pl. note that the Whole Life component is not ’’Free’’. It is built into the premium.
Initially JEEVAN ANAND is a classic Endowment policy with the premium payable throughout the Term of the policy. On surviving the Term (in other words : On Maturity), the policy holder would get the Sum Assured (SA) + Accrued Bonuses + Loyalty Additions ( Also called “Final Additional Bonuses” or “Terminal Bonus”- Your reward for sticking with LIC ! )
The charm of this policy is that even beyond maturity, the risk coverage for an amount equal to the Sum Assured continues until the death of the policy holder when his nominee would get the SA.
Therefore, this type of policy is ideal for individuals with Families dependant on them.
Pl. note that returns from this scheme are dependant on the Bonuses declared by LIC every year. Logically, the longer your Term, the more you stand to gain as policies with longer maturities get higher bonuses. My advice to you would be to take policies for Terms of either 11, 16 or 21 years.
Pl. also note that the Whole Life portion of the coverage ( which starts after the Term of the policy ) does NOT earn ANY bonus for its term. Therefore while the Sum Assured amount may appear to be high, in real terms, the amount may not be much.
Another important point to be noted is that if you were to die during the term of the policy, your family would get only the Sum Assured and accrued Bonuses. The extended coverage would obviously not apply.
There is also the Accident Death Rider ( Maximum coverage of Rs. 5 lakhs ) which is valid beyond the Term of the policy until the Age of 70. In the event of accidental death, DOUBLE the Sum Assured will be paid. I would strongly recommend this as the additional premium payable is very meagre.
Like most Insurance policies, you will get the usual Sec 88 benefit for the premiums paid + the maturity/death proceeds received are tax-free.
Should you opt for JEEVAN ANAND ? It depends on your priorities. Consider the following points :
If returns are the priority, one should stick to Whole Life policies ( Where LIC typically announces the highest bonus rates. For 2000-2001 these varied from Rs. 95 per 1000 Sum Assured to Rs. 106 per 1000 Sum Assured . In simple terms that’s between 9.5 % to 10.6 % of the Sum Assured ) Pl. remember that these bonus rates could very well go down in the future. The downside of Whole Life policies is that you will never see the money while you are alive !
If one requires high coverage, again Jeevan Anand is not suitable. One is better off looking at Term Products like LIC’s Anmol Jeevan, New Bima Kiran or HDFC’s Term Assurance Plan or ICICI’s LifeGuard.
If wealth creation is the objective, stick to PPF or other avenues. Insurance is not suited for your needs.
Jeevan Anand is ideal if you want a judicious balance of reasonable premium for decent risk coverage where you will get some money as an incentive for surviving ( which you can then blow on a Honda City or a World Tour ! Tain Tain Phiss !!!) + more importantly, you will also have the satisfaction of leaving an equal sum behind for your near and dear after you ( So that you are not cursed ! ) ANAND HI ANAND. Now you know why this scheme shares my name ?!
All the Best !
ANAND SHARMA