Jeevan Aastha is the new insurance policy by LIC (Life Insurance Corporation of India) that is being much talked about offlate. I went through LIC’s website to understand the product better.
Before taking up the policy, there are a couple of things one should keep in mind. One should clearly understand the difference between Basic Sum Assured and Maturity Sum Assured. For this policy, Basic Sum Assured is 6 times the Maturity Sum Assured. Also, it may be noted that Basic Sum Assured is applicable for the first year of the policy. Apart from these two terms, there is also ‘Guaranteed Return‘ in case of death or policy maturity upon survival. LIC has put up benefit illustation details as well. Let us understand what this means in lay man terms with respect to what is good and what is not.
First the Good:
1. Tax benefit under Sec 80C on initial premium.
2. Maturity benefit is non taxable under Sec 10(10D)
3. On death during the first policy year.
4. Guaranteed Addition at two rates for 5 and 10 year terms.
5. Loyalty Addition – a variable component based on company performance.
Keeping aside LIC’s service quality and track record in claim settlement, here comes the bad:
1. Guaranteed additions are not on the Basic sum but on the Maturity Sum assured.
2. Insurance benefit decreases drastically after first year.
3. This policy looks like more of an Investment scheme than an Insurance cover.
Now lets see the returns of Jeevan Aastha in comparison with Fixed Deposits and PPF.
Plan (for an individual of 31 yrs) Investment
Return Amount Risk on 10th year 10th year on maturity LIC’s Jeevan Aastha 53,625 1,65,000 1,07,184 Fixed Deposit 53,625 1,05,814 1,15,338 Public Provident Fund (PPF) 53,625 1,01,525 1,10,155
Disclaimer: I am neither an insurance agent nor an investments advisor. All the info provided in this article is based on my understanding of the policy after going through LIC’s website.