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3.09 

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NEW JEEVAN SHREE : Increasing Risk Cover+Guarantee
Sep 14, 2002 12:40 AM 89060 Views
(Updated Mar 01, 2003 01:12 AM)

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Friends,


A perennial favourite of most Financial planners, LIC agents and the public, its amazing how one scheme is suitable for so many different classes – High Net Worth individuals, Self-employed professionals, Businessmen, Artists and even Companies for their Senior executives as a ‘Key-Man” policy ! I will try to explain the salient features of this scheme in the following paragraphs. At the end, I hope I would have convinced you to take this policy !


At the outset, I must inform you that JEEVAN SHREE has been withdrawn on 31/Jan/2002 and replaced by NEW JEEVAN SHREE. What’s new ? Nothing ! Old wine in an old bottle but with a new cap ! What is the new cap ? A cap on the Guaranteed Additions from Rs. 75/1000 in the earlier avtar to Rs. 70/1000 in NEW JEEVAN SHREE (NJS) and also an increase in the premium. Despite this, it remains one of the best LIC products. What are the advantages ? Read on………


The risk coverage increases with each completed policy year. The minimum Sum Assured is 5 lakhs. Risk cover increases from 5 lakhs to 5.35 lakhs in the second year, 5.70 lakhs in the third year so on and so forth.


One can also opt for a TERM ASSURANCE rider when one can get additional risk coverage by paying a small extra premium and also a ACCIDENT RIDER ( Upto a maximum of Rs. 10 lakhs )


Another big advantage is that the premium is payable for a limited period while the coverage continues for the full term of the policy. There is also enormous flexibility in choosing the Premium Payment Term (PPT) For instance for a 25 year policy, one can choose between 1,2,3,4,5,6,10 & 16 years. Therefore, one can either decide to finish it off quickly in a shorter PPT or pay a lower amount and stretch it to 16 years. Naturally, shorter the PPT, higher the returns.


What about returns ? A GUARANTEED ADDITION (GA) of Rs. 70 per 1000 Sum Assured ( In layman’s language, that’s an “interest” rate of 7 % p.a ) as well as LOYALTY ADDITIONS (LA) that are payable on maturity. The “indicated” percentages of LA are : 5 % of Sum Assured for a Term of 5 years, 12.5 % for 10 years, 25 % for 15 years, 40 % for 20 years and 75 % of SA for 25 year Policy Term. Pl. note : In its latest press release, LIC has mentioned that it has increased the LA for the Five year Term from Rs 50 to Rs 75. Therefore while LA per se is an unknown factor, given the high minimum Sum Assured of 5 lakhs, the chances are that LIC would at least match if not better the “indicated” values.


If death occurs during the PPT, the nominee would get the SA + accrued GA + LA ( If the policy has completed at least four years )


On Surviving the term of the policy (i.e On Maturity), the policy holder gets the SA+GA+LA.


Now that I have given you the numbers, I can do some number crunching ! Let us all assume we will survive until maturity of the policy. How much are the returns ? It varies based on the age at entry as well as the PPT. A rough calculation based on a SA of 5 lakhs for Age 36, Term 25 years and PPT of 16 yields a return of 7 %. Reduce the PPT to 10 years and you end up with a marginally higher 7.05 % return Not very high by any yardstick but certainly not too bad – especially when you factor in the benefit of insurance from day one itself.


Would I recommend NJS ? Most certainly. The biggest advantage being the “Guaranteed” element. The returns are guaranteed by the Government of India. Even in the unlikely event of LIC becoming insolvent, the Govt will pay the policy holders the SA as well as the GA amount. “Guaranteed” also means that should we move into a low interest regime with low inflation say after 10 years when deposit rates are low at say 4-5 % ( Don’t laugh ! We might wipe out our Fiscal Deficit, have a Trade surplus etc etc ! I have tremendous faith in India’s Future !!! ) LIC would still give you Rs. 70 per 1000 SA. Look at the other scenario – That we go back to the high inflation, high interest rates regime. Don’t fret. You will still be compensated in the guise of a high LA % Heads you win and Tails LIC loses !


Beat LIC at its own game. Go ahead and get yourself a NJS policy. It could be one of your best Financial moves ! I read an interview recently that LIC is planning to phase out NJS soon as per the directions of the IRDA ( Insurance Regulatory & Development Authority) SO HURRY ! LAST FEW DAYS !!!


ALL THE BEST !


SHREE Anand Sharma


UPDATE (1/03/2003) : Its Official - New Jeevan Shree to be withdrawn from 25/03/2003.


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