{"id":344,"date":"2018-12-01T11:32:16","date_gmt":"2018-12-01T06:02:16","guid":{"rendered":"https:\/\/srinivesh.in\/blog\/?p=344"},"modified":"2019-02-24T16:56:21","modified_gmt":"2019-02-24T11:26:21","slug":"jeevan-anand-joy-for-the-agent-not-for-the-buyer","status":"publish","type":"post","link":"https:\/\/srinivesh.in\/blog\/jeevan-anand-joy-for-the-agent-not-for-the-buyer\/","title":{"rendered":"Jeevan Anand – Joy for the agent, not for the buyer"},"content":{"rendered":"

Jeevan Anand, now New Jeevan Anand, is one of the most popular plans in the portfolio of LIC products. An unofficial package of these policies, called Retire-and-Enjoy, has been pushed by many insurance agents in the past. In this short article, we see how this plan is inferior to a combination of a pure term insurance and a pure financial product.<\/span><\/p>\n

Endowment plans are always popular with insurance companies and agents. Due to aggressive positioning, they also become the default choice for many individuals looking for life insurance. In this article, we compare this investment linked product with a separate investment product and show that it helps to not mix insurance and investment.<\/span><\/p>\n

Review of popular New Jeevan Anand plan<\/span><\/h2>\n

Jeevan Labh from LIC is described as a ” participating non-linked plan which offers an attractive combination of protection and savings. This combination provides financial protection against death throughout the lifetime of the policyholder with the provision of payment of lumpsum at the end of the selected policy term in case of his\/her survival.” In effect, this is a typical endowment plan; it also has a feature of whole life plan thrown in. Other articles in our blog have compared endowment plans like Jeevan Labh and whole life plans like Jeevan Umang.
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A lot of insurance focused sites, blogs, etc.term New jeevan Anand as one of the best endowment plans with high returns. A lot of the reviews of this plan, like other LIC plans, are featured by insurance websites. They obviously would claim that this is a great plan.<\/span><\/p>\n

In this article, we would use the illustration provided by LIC itself and compare these two approaches:<\/span><\/p>\n

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  1. Approach A – New Jeevan Anand plan for Sum Assured of 1 lac and term of 35 years
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  2. Approach B – A combination of a pure term plan for 35 years, and investment in a pure play financial product – Public Provident Fund<\/span><\/li>\n<\/ol>\n

    New Jeevan Anand – Illustration<\/span><\/h2>\n

    The details at LIC illustration<\/a> provides a good amount of insight into the workings of the plan. A snapshot is provided below. Please note the two scenarios of return assumptions. The assumptions are for the entire life of the policy. For a large part of the policy term, the projected death benefit is above 2 lac even in the 4% return scenario.  The benefit is of course higher in the 8% return scenario. <\/span><\/p>\n

    \"\"<\/p>\n\n\n

    The illustration image is a bit difficult to read. For comparison, please look at the various values (over the years) in the Variable column for Scenario 2.  Assuming an 8% return, this amount is s 16,000 at the end of the 5th year, 32,000 at 10th year, and so on, going up to 1,39,000 at the end of the 35th year.  The insurance agents would compare this with the total premium paid – about Rs 1,10,000 – and show how you are getting a lot of returns. <\/p>\n\n\n\n

    Also, after the 35th year, the plan would pay Rs 1 lac to the beneficiary on the death of the policyholder. In effect, after the policy term ends, this plan becomes like a whole life policy with a predetermined death payout.  We would show that a pure financial product like PPF can let you accumulate a much larger sum; which you can choose to pass on to the beneficiary.
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    Alternative Approach – Illustration<\/h2>\n\n\n\n

    For this approach, we use these assumptions:<\/p>\n\n\n\n