In the year 2004, when i was newly entered into my job. My father decided to take one LIC policy for me and called LIC agent. He explained about Jeevan Anand Policy. Without any second thought we took the policy.
That time Sum Assured 5 Lakhs was a big amount for me. When Agent said Maturity amount after 30 years would be more than 10 Lakhs, i said wow it is more than double of the premium that we are going to pay. When our agent said that risk cover of LIC will continue after maturity also, I thought that it is not only the Jeevan Anand but Jeevan after Anand.
My Policy commenced in Feb,2004. I am paying Rs.16,400 yearly for the Sum Assured of 5 Lakhs. After 8 years, till now i have paid more than 1.35Lakhs and earned bonus of 1.8Lakh. That means totally more than 3 Lakhs i have earned.
Recently i read several articles on Personal finance. When i came to know that insurance amount should be atleast ten times of anual income, i checked my insurance and compared with my earnings. I realised that present Jeevan Anand policy is not at all sufficient for me. Then i planned to take another Jeevan Anand for the amount which i required, but the policy premium costing very high. then i started analysing my policy. i observed following drawbacks in Jeevan Anand Policy which i am going to share with you.
High Premium & Less Cover: Eventhough i enrolled for Jeevan Anand Policy in my early age (24 years) i am paying 16,400 premium yearly for 5Lakhs policy. If i would have gone for term insurance for Fifty Lakhs at that age my premium would have cost around Rs.6000 per annum.
No Liquidity: Insurer won’t receive anything till the maturity or risk whichever is earlier. That means i can’t touch my amount untill 2034. Ofcourse i may go for loan with less interest compare to other financial institutions. But why should i pay interest for my amount. If i could have put my premium amount in other schemes like chits, mutual funds etc. i could have enjoyed higher liquidity.
Less Returns: Ofcourse Jeevan Anand gives maturity benefit, where as term insurance won’t. How much returns does Jeevan Anand is giving for us? For the age of 24 years 50Lakhs policy is coming around at Rs.6000 per month for thirty years. In this ratio for 5Lakhs policy it costs around Rs.600. Let say Rs.1000 for 5Lakhs. That means let us deduct Rs.1000 for insurance and take remaining Rs.15,400 for savings. LIC charging 9% (for policy holders only, for others it is high), interest on loan. Calculate Rs.15,400 investment per year with a cumulative interest of 9%. At the end of 30 years it costs around 22,88,058. I am paying 4,92,000 (16,400*30) as a premium. How much LIC paying after maturity. Do you know it will be around 12lakhs to 13lakhs. When i gone through my Policy document after maturity Accidental Death Benefit only will be given too upto 70 years. If death happens other than Accident or after 70 years Nothing will be paid. Eventhough if after maturity benefit sum assured 5 Lakhs is received, it is not a reasonable amount.
We have plenty of options in our hand which gives minimum 8.8% yearly cumulative interest (Ex.PPF) to 15% (ex.Chits, Mutual funds). Then why should we go for inadequate insurance and less returns clubbed policy. Let’s think once and decide which policy is better for you.