LIC

Why avoid LIC's New Jeevan Anand and other such schemes?

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• published: 30 Oct 2015
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In this video, I am explaining why you better avoid schemes like LIC's Jeevan Anand and what the best alternative is. I have taken this just as an example. There are many such schemes in the market which I don’t subscribe to. Such plans are extensively marketed because the insurance company and the agents get enormous money from them. But we have to be careful when dealing with our hard-earned money. Stay tuned for such videos by subscribing to my YouTube channel: http://bit.ly/AnandSpeaking Feel free to follow me online at: https://www.facebook.com/AnandSpeaking https://twitter.com/AnandSpeaking https://anandspeaking.wordpress.com/ Lets take a quick look at the New Jeevan Anand scheme. Its a “whole life endowment” policy. Let me break it down. The “Whole Life” means that on your death, whenever it happens, your dependents will get a certain amount. The “Endowment” means that your money will be invested on your behalf and then after a certain number of years, it will be returned to you with some interest. I have already done a detailed analysis of this scheme in another video – https://youtu.be/15dgX1dSsDc. In short, Jeevan Anand is an insurance cum investment scheme. Sure, it gives the convenience of investing your money and insuring your life in a single scheme. But, the cost of convenience becomes so expensive that you may better do some research before starting on such schemes. In this video, I am going to propose a customized scheme for both your insurance and investment need. The beauty is that I am going to take the same premium amount of Jeevan Anand and play with it; no extra money is required. Before, jumping into my scheme, let me just tell you that, for Jeevan Anand, I have taken the starting age of 25, term of 35 years for a coverage of 10 lakhs. And, the annual premium amounts to 28,282 rupees. Lets call the customized scheme “THE SMART SCHEME” First, I never wanna combine investment and insurance; so I split them. If you ask me, “Term insurance” is the one and only the best insurance type. In short, the term insurance does not give you any money back; but provides the coverage amount to your dependents, if your death happens within the policy term. Thats the purest form of insurance. Though private companies offer cheaper alternatives, I will go with LIC for the argument sake. So, as part of the SMART scheme, you will subscribe to LIC’s Amulya Jeevan scheme. For the starting age of 25, term of 35 years and for a coverage of 25 lakhs, your annual premium is just about 5900 rupees. You get better coverage for lesser premium. Your life is secured now for 25 lakhs instead of 10 lakhs with Jeevan Anand. Then comes the investment part of the SMART scheme. Since you pay lesser premium for the term insurance, you save 22380 rupees a year. How you are gonna invest this money determines the success of my scheme. We have already talked about SIP returns in another video – https://youtu.be/XDTzY6xMsA8. Though you may see more than 20% returns in that video, the history says it is wise to expect 12% annual return from the stock market in the long run. So, as part of the scheme, you will invest in any of the long existing and top performing equity diversified mutual funds in a SIP manner. If you do the math, the savings due to the term insurance becomes 1865 rupees a month. You keep investing that amount in SIP every month for 35 years. Smart Scheme = Term Insurance + SIP Now, with the plan completely laid out, lets see what would be difference in the amount that you or your dependent are expected to get at different stages of your life. Lets see the chart for a short time, then we will deal with the numbers. The red line covers the expected growth of SMART plan while the blue line below covers the expected growth of Jeevan Anand. Do you see how SMART plan is increasingly outperforming Jeevan Anand? The gap between the returns of the schemes is widening towards the end. Thats the magic of compounding. Your SIP delivers that magic. To arrive at this smooth and beautiful chart, I have done an extensive analysis of both the schemes year by year. Well, I love playing with numbers :) Not to miss the “whole life cover” aspect of Jeevan Anand, you will get 10 lakhs at anytime the death happens. But you can easily get that 10 lakhs with the SMART scheme. Just invest 1.21 crores in a Fixed Deposit scheme and you can easily overshoot 10 lakhs in a year. So far, we have seen in any stage of your life, the SMART scheme appears to outperform Jeevan Anand by a huge margin. Stay tuned for such videos by subscribing to my YouTube channel: https://www.youtube.com/channel/UCJL33Qy88ZPe7c9pqHm0cSA?sub_confirmation=1 Feel free to follow me online at: https://www.facebook.com/AnandSpeaking https://twitter.com/AnandSpeaking https://anandspeaking.wordpress.com/