Rewrite this article: Do you need LIC insurance? My aim is not to demotivate you from investing in LIC or any other policy but to encourage you to invest, the only motive is that your investment decision should be an informed decision. It doesn’t have to be like your friends, colleagues, or family member tell you. about the LIC policies your neighbor took out last month and you go ahead and buy the policies. You should not compare LIC insurance with MF or PPF. He advises – do not mix insurance and investment; Don’t confuse the endowment with an investment. He recommends term insurance for insurance and MF for investment. And then it proves how the recommended route will produce better returns. So far I’m not talking about whether the license is good or bad. I’m trying to give you the real fact. Think logically, I am trying to encourage you to get the best outcome for your investment that you have already invested in or are considering investing in, that is why you are spending your time reading this blog. It’s your money, and your time, so why didn’t you deserve more when there is a possibility, the only thing is that you need a little more information and research work on your part . Benefits: LIC is a huge organization, with huge funds. It has been found in India since the 1950s. At that time, LIC policies were the only method of obtaining life insurance and earning returns. LIC used to invest a part (a very large part) of our premium in the stock market and then return a part (a small part) of the profits to us on maturity. Reimbursement and settlement of LIC have always been prompt. Thousands of people have subscribed to an LIC insurance policy for double benefits: insurance and savings. In fact, the LIC slogan changed to – Beema Bhi, nivesh Bhi (take out insurance, save money). LIC returns are tax-exempt, except for pension plans. The inconvenients: The PFR is very poor on both counts: life insurance and investment. Firstly, the life cover by LIC from 5 lakhs to 30 lakhs is too low. You can of course opt for more coverage but the premium will be very high. Second, the return on investment is very low. At best, the yield is 6.5%. LIC is good or bad! Why is LIC very attractive for everyone? a) LIC promises an assured or guaranteed return and indicates an amount that will be paid to you at maturity (usually between 20 and 30 years). This seems like a FANTASTIC AMOUNT at this time. b) LIC keeps insisting that this money is insured. If we talk about market-related investing, the argument against it is always the following: Sir, ka kya bharosa market? Aaj hai, Kal Nahi? Aapko Vahan koi guarantees data hai kya? (Sir, what is the assurance of the market? Today it is high, tomorrow it will not be high. Can anyone guarantee market returns?) c) LIC never declares returns in terms of CAGR. So we remain ignorant. d) We hear that a neighbor, colleague, family member has purchased such an LIC insurance policy and we are also immediately concerned – I also have to have life insurance. So let’s compare LIC Jeevan Anand 915 policy (815 is closed now). The insured policy amount is an example but the rest of the figures are based on this amount with realistic figures: [A] Sum insured: ₹25,00,000[B] Years in office: 25[C] Age at departure: 30D]The policy starts in a year: 2020[E] Bonus per ₹1,00,000: ₹4,581[F] Premium discount (2%): ₹-91.62[G] Final bonus per ₹1,000: ₹4,489.38[H] Bonus per year: 1 ₹12,234.50[I.1] First year bonus at 4.5% GST: 1 ₹17,285.05[I.2] Premium paid for the next 24 years at 2.25% GST: 1,14,759.78 ₹[J] Total premium paid for the full term: ₹28,71,519.68 [K] 125% of the total premium: 32 ₹26,741.88[L] Simple reversion bonus rate per ₹1,000 of SA (A): ₹49.00[M] Amount of the simple reversion bonus for 25 years (A/1000 * L): 30 ₹62,500[N] Additional bonus (considered at the same rate for the last year or M): 1 ₹22,500 [O] Final profit (greater than A or K+M+N): 64 ₹11,756[P] Payment in the event of death after maturity: Sum insured = ₹25,00,000 What is the CAGR or return on investment? If you consider the full double profit or O and P, that’s a big 6.53%! If you don’t consider (P) because of the “what is this money for after I die?” right, then it’s 6.02% Have you considered the value of Rs 64,11,756 after 25 years, assuming you buy the policy today? It is 14,52,263.67 rupees. It’s still not bad but it’s not great as it seems, is it? How did LIC become popular Until the mid-1980s, the stock market was simply performing well. There was very little buoyancy. There were only a few stock exchanges – just four (BSE, DSE, CSE and MSE) and a few branches. You had to negotiate physically and via a broker. We didn’t understand the markets – even today, very few people understand it. Then Harshad Mehta fought his way to dizzying heights. This caused great interest in the stock market and hurt people who lost money. LIC remained a winner. Mutual funds were unknown until the late 90s and only became popular when SIP was introduced. On top of that, there was no term insurance (or LIC never promoted it) and there were no independent private insurance players. So LIC ruled like a king. Today, LIC tactics have changed. The argument of all employees and agents of LIC is: long established, always settled (actual settlement rate is 98%), trust over the years, supported by the government, will not run away not with your money, will not fail, etc. But the main argument these people make against term insurance is this: you pay all this money but you get nothing in return. Nobody, I repeat, nobody gives the real comparison. So, the alternative? a) A term insurance plan of ₹50 lakhs or more. The premium will be much cheaper. See the examples at the end.b) Invest balance premium in MFs and get much better returns. Is lic good or bad? Comparison: LIC is good or mutual fund in prospective return a) For an LIC premium of ₹9,572 per month or ₹1,14,861 per year, you get a paltry cover of ₹25 lakhs. For ₹12,000 to ₹14,000, the same age of 30 years, a non-smoker can get ₹1 Cr coverage. For as low as ₹778 pm or ₹9336 pa, you will get double the coverage of LIC or ₹50 lakhs. b) We will be quick to jump, what about returns? So here is a comparison with investing in MF SIP [Q] LIC payment per month ((D/B)/12): ₹9,572[R] Term Insurance for 50 Lakhs up to 65 years: ₹778[S] MF SIP per month: ₹8,794[T] FCP investment duration in years (B): 25[U] SIP return: ten%[V] Corpus after 25 years: 1 17 65 408 ₹[W] Own contribution: 26 38 200 ₹[X] LTCG tax on MF at 10%: ₹ -9,03,863[Y] Final value of the MF corpus (V+X): ₹1,08,76,262[Z] Difference (YO): ₹44,64,506. (I am not considering the death benefit here as it is of no use to me. Even if I did, it is ₹19,64,506 more and lest one forget, if the corpus MF remains intact, assuming 25 years of vesting it will increase to ₹12,76,34,190.) Is the license good for long term investment? What if you put your money in PPF c) Do you think FM is risky? So try FPP. The limit is ₹1.5 lakhs per annum. But by investing for the same 25 years, you will get1,10,39,881 ₹. But that assumes a constant maturity yield of 7.1% and that is subject to change. However, it is unlikely that it will fall below 6.5%. And this amount is also excluding taxes. Here is the table : So there is the same cover for you as LIC Jeevan Anand, but much better when it comes to more life cover and more returns. LIC-JA-and-MF comparison Is the license a good investment? Now it’s time to make a decision, look at the numbers above, twice the life cover and ₹44,64,506 more than LIC. With the same amount of money, you can get double the benefits and better returns. Is it really comparable? Some will not hesitate to say that returns of 10% are not possible in MF.…


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