LIC Jeevan Pragati Plan (Table No.838) Review

By | April 29, 2016
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LIC Jeevan PragatiLIC Jeevan Pragati Plan (Table No.838)

An introduction to the LIC Jeevan Pragati (Plan no 838) :

The Life Insurance Corporation of India (LIC) has initiated a new Endowment plan known as the LIC Jeevan Pragati (Plan no 838). This plan is obtainable for buying from the 3rd of February, 2016. The new endowment assurance plan is a plan involving profits, is non – linked, & is a savings cum protection plan.

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The major characteristic of this Jeevan Pragati plan is the ‘sum guaranteed on demise’ (part of demise advantage) automatically hikes post every 5 years at some stage in the tenure of the policy.

LIC’s New Plans in the year 2016 :

LIC of India has already launched 2 fresh schemes in the year 2016 :

  • LIC Jeevan Labh – New Endowment Plan : This plan has been initiated  on the 4th of January, 2016. Click here to view the complete review on Jeevan Labh.
  • LIC Jeevan Shikhar Plan : This is a single premium endowment plan which has been initiated on the 11th of January, 2016. Click here to view the complete review on Jeevan Shikhar plan.

Consequently, LIC’s Jeevan Pragati will be the 3rd new plan of LIC in the year 2016.

Main highlights & Eligibility Conditions of LIC Jeevan Pragati Plan :

The Main highlights of the new endowment plan are mentioned as under :

  • Minimum Basic Sum Guaranteed (payable on maturity) : Rs. 1, 50, 000 / –
  • Maximum Basic Sum Guaranteed : No Limit (Maturity Sum Guaranteed must be in multiple of Rs. 10, 000 / – only)
  • Minimum Policy Tenure : twelve years
  • Maximum Policy Tenure  : twenty  years
  • Minimum Age at entry for Life Guaranteed : Twelve years (completed)
  • Maximum Entry Age : forty – five years (nearer birthday)
  • Maximum Age at Maturity for Life Guaranteed : sixty – five years
  • Premium payment mode : Annually, half-annually, quarterly & monthly.
  • Accidental Demise & Disability Advantage Rider is obtainable on payment of added premium.
  • Minimum Accident Advantage Sum Guaranteed is Rs 10, 000
  • Maximum Accident Advantage Sum Guaranteed is an amount equivalent to the Basic Sum Guaranteed, subject to the maximum of Rs 1 Crore.
  • Minimum entry age for the rider is eighteen years.
  • Agent’s commission for policy tenure 12 to 14 years is 20 percent in 1st year & 7.5 percent in 2nd & 3rd year. The first year agents’ commission would be 25 percent on 15 year policy tenure.

Advantages of the LIC’s Jeevan Pragati policy :

  • Demise Advantage of the Jeevan Pragati Plan : On demise of the Life Guaranteed in the policy tenure, the Demise Advantage  which is ‘Sum Guaranteed on Demise’  plus the Vested Simple Reversionary Bonuses  plus the Final added bonus, if any, must be payable to the nominee. The Sum guaranteed on demise automatically hikes every 5 years. Where “Sum Guaranteed on Demise” is defined as the higher of  a) Ten times of annualized premium (or) b) Absolute amount guaranteed to be paid on demise, which is as below;
  1. i) At some stage in the 1st 5 policy years : 100 percent of the Basic Sum Guaranteed.
  2. ii) At some stage in the 6th to 10th policy years : 125 percent of the Basic Sum Guaranteed.

iii) At some stage in the 11th to 15th policy years : 150 percent of the Basic Sum Guaranteed.

  1. iv) At some stage in the 16th to 20th policy years : 200 percent of the Basic Sum Guaranteed.
  • Maturity Advantage payable in the LIC Jeevan Pragati Policy : On continued existence till the conclusion of the policy tenure, the maturity advantage which is ‘Sum Guaranteed on Maturity’  plus the Simple Reversionary Bonuses  plus the Final Added bonus (FAB) if any, must be payable to the policy holder. Sum Guaranteed on Maturity is equivalent to Basic Sum Guaranteed.
  • Final Added Bonus is not to be paid on PAID – UP policies.
  • The date of origination of risk under Jeevan Pragati plan will be instantly from the date of issuance of policy.

Example of the LIC Jeevan Pragati Plan :

Mr. Viren (30 years) buys LIC Jeevan Pragati insurance policy with a Sum Guaranteed of Rs 10 Lakh. He selects 20 years as the policy tenure.

Demise Advantage in viren’s case : If Mr viren expires, the Demise Advantage  which is the total of ‘Sum Guaranteed on Demise‘  plus the Vested Simple Reversionary Bonuses  plus the Final added bonus, if any, must be payable to the nominee.

The risk cover (Sum guaranteed on Demise) relies upon the concluded no of policy years. Absolute amount guaranteed to be paid on demise, will be as below;

  1. i) At some stage in the first five policy years : 100 percent of the Basic Sum Guaranteed.
  2. ii) At some stage in the 6th to 10th policy years : 125 percent of the Basic Sum Guaranteed.

iii) At some stage in the 11th to 15th policy years : 150 percent of the Basic Sum Guaranteed.

  1. iv) At some stage in 16th to 20th policy years : 200 percent of the Basic Sum Guaranteed.

Maturity Advantage : Suppose if Mr. Viren continues to exist till the policy tenure maturity, the maturity advantage payable to him will be as under :-

  • Maturity amount =  Rs 10 Lac  plus the Bonus  plus the Final Added Bonus (if any)

LIC Jeevan Pragati Plan & Calculation of Returns on the maturity : 

We have computed the returns on maturity by means of IRR (Internal Rate of Return) function of MS Excel. In the above illustration, policy interval is 20 years. At the commencement of 21st year (policy maturity), the policy holder will get around Rs 3.36 Lakh. We have supposed Rs . 42 per Rs 1000 Sum guaranteed as Annually bonus & Rs 400 as Final Added Bonus (FAB). The FAB relies on the quantum of sum guaranteed & the policy tenure.

Consequently, the expected returns from LIC Jeevan Pragati insurance plan can be in the range of 6 percent to 7 percent.

 

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