New Delhi, Aug. 26: Life Insurance Corporation’s revised policy —New Jeevan Shree —with low guaranteed returns continues to attract a large number of policyholders in the absence of any private insurer offering a comparable policy.
The old Jeevan Shree policy provided guaranteed return at the rate of Rs 75 per thousand. This has now been reduced to Rs 70 per thousand after the new policy was re-launched on March 5, earlier this year. In this case, if a policyholder purchases a policy with a sum assured of Rs 5 lakh for any number of years till 25 years, he will get a bonus of Rs 35,000 per annum. But had the policyholder purchased the old Jeevan Shree policy, he would have got a bonus of Rs 37,500 per annum for the same plan mentioned above, implying a loss of Rs 2,500.
The New Jeevan Shree policy, which can be purchased for a term ranging between five years to 25 years, has different modes of premium payment. The payment of premium can either be single, yearly, half-yearly or quarterly. The annual premium for a policy of 25 years is also payable maximum for a period of 16 years.
According to an actuarial evaluation, a 30-year-old man who purchases a New Jeevan Shree policy for 25 years and chooses to pay his premium annually will end up paying Rs 31,958 by the end of 16 years. Assuming that the policyholder would have purchased the old Jeevan Shree policy, he would have to pay only Rs 25,272 under the same plan. This implies a loss of Rs 6,686. If a policyholder chooses to pay single premium for a New Jeevan Shree policy of 25 years, he will have to shell-out Rs 2,86,075. But assuming he would have purchased the older policy, he would only have to pay Rs 2,05,825. This implies a hike of Rs 80,250.
The plan does offer an attraction of accident benefit. This will now be available up to a maximum limit of Rs 10 lakh (inclusive of the maximum limit of Rs 10 lakh under other life insurance plans). Sum assured under this plan will be payable either on death or on maturity whichever is earlier. Besides, the plan continues to give tax benefits under Section 88 of the Income Tax Act.
Although the loyalty addition provision is still present under the new plan, an LIC agent says, “Returns on loyalty addition were not guaranteed earlier as well, but we maintained a chart explaining to policy holders the percentage of addition that would accrue to him depending upon the sum assured and premium paid. Now we do not do so”.
“Last year Jeevan Shree accounted to more than 5 per cent of the total number of policies sold. This year it would at least be 4 per cent,” LIC managing director N. C. Sharma said. “One of our agents has already sold this policy worth Rs 95 lakh in the last three months. I think we are still doing very well,” he added.
Officials of some top private insurance firms like Max New York Life, HDFC Life Insurance and ICICI-Prudential Life Insurance confirmed that they do not sell policies with assured guaranteed returns. ICICI Prudential Life, however, offers partial guaranteed returns at the rate of 3.5 per cent on aggregate of sum assured for its policies like Save ‘n’ Protect, Cash Back, Smart Kid and Forever Life.