LIC Declares Higher than Expected Bonus Rates for Jeevan Umang
Life Insurance Corporation of India (LIC) has declared a higher than expected Bonus Rates for its innovative guaranteed benefit plan, Jeevan Umang for the valuation period from 1st April 2017 to 31st March
Surprised? Yes, what you read is right. Let us have a detailed look…
Jeevan Umang is a specialized endowment type of plan which provides a guaranteed income benefit at the rate of 8% of Sum Assured (per annum) after the premium paying period. It also offers life long insurance coverage and value appreciation even after the premium paying period. Read more on the features and benefits of Jeevan Umang.
Jeevan Umang was introduced by LIC of India on May 2017. As the bonus rate for the plan was not declared at the time of inception, ‘Benefit Illustration’ as per the IRDA stipulation was the only direction and ‘Guide Wire’ available at that time, towards the expected returns from the plan.
What is a benefit illustration?
A benefit illustration is a year-by-year summary of the costs and benefits of an Insurance Plan. As per the new IRDA guidelines – “All insurance products shall provide the prospective policyholder, a customized benefit illustration, illustrating the guaranteed and non-guaranteed benefits at gross investment returns of 4% and 8% respectively. The corresponding net yield shall be demonstrated only with respect to gross investment return of 8% p.a. Such benefit illustration shall be signed by both the prospective policyholder and the intermediary and shall form part of the policy document.”
Benefit Illustration of Jeevan Umang Plan.
Benefit Illustration of Jeevan Umang downloaded from the the website of LIC of India is shown below.
As per the benefit illustration provided above, if LIC can achieve a gross investment return of 8 % for this plan, the expected bonus amount has to be Rs. 22500 for a 5 lakh sum assured policy with premium paying term of 15 years. In other words, the expected bonus rate is Rs. 45 per thousand Sum Assured.
| Jeevan Umang – Expected Bonus Rates Based on Benefit Illustration (Scenario 2) | ||||
|---|---|---|---|---|
| Premium Paying Term | 15 Years | 20 Years | 25 Years | 30 Years |
| Bonus Rates | 45 | 43 | 46 | 48 |
Jeevan Umang – Plan 845 – Latest Bonus rates declared
Bonus Rates for Jeevan Umang was declared for the first time on the 2017 – 18 valuation and the declared rates are as follows.
| Jeevan Umang Bonus Rates 2018 – 2019 | ||||
|---|---|---|---|---|
| Age at Entry | Bonus During Premium Paying Term | |||
| 15 Years | 20 Years | 25 Years | 30 Years | |
| 0-14 | NA | 70 | 65 | 60 |
| 15-29 | 67 | 62 | 56 | 50 |
| 30-44 | 60 | 55 | 50 | 49 |
| 45-55 | 51 | 50 | 49 | NA |
The bonus rates declared are considerably higher than the benefit illustration (Scenario 2) bonus rates. It implies that LIC is getting a gross investment return higher than 8% in Jeevan Umang plan.
The Chart provided above will help you in comparing the scenario-based and actual bonus rates. If you are unable to view the chart, please refresh the page.
Jeevan Umang – Bonus rates – during and after the premium paying term.
One specialty of Jeevan Umang plan is that the bonus rates during the premium paying term and after the premium paying term are different. Afforementioned bonus rates shall be added to the plan during the premium paying term. Exact details of the bonus rates after the premium paying period shall be known only as and when it is declared by LIC.
But, if we follow the benefit illustration 8% scenario, we can see that the bonus after the premium paying term is roughly 50 % of the rates during the premium paying term. This fact can help you in arriving at an
Jeevan Umang – Expected Final Addition Bonus Rates.
The following chart shows the expected Final Addition Bonus rates of Jeevan Umang plan based on the 8% gross investment return scenario.
| Expected FAB Rates per 1000 Basic Sum Assured as per Benefit Illustration Scenario 2 | |||||||
|---|---|---|---|---|---|---|---|
| (Gross Investment Returns @ 8%) | |||||||
| Policy Term | FAB | Policy Term | FAB | Policy Term | FAB | Policy Term | FAB |
| 15 | 10 | 35 | 1150 | 55 | 4490 | 75 | 9360 |
| 16 | 13 | 36 | 1275 | 56 | 4720 | 76 | 9560 |
| 17 | 15 | 37 | 1400 | 57 | 4960 | 77 | 9760 |
| 18 | 18 | 38 | 1525 | 58 | 5200 | 78 | 9940 |
| 19 | 25 | 39 | 1650 | 59 | 5440 | 79 | 10110 |
| 20 | 35 | 40 | 1775 | 60 | 5690 | 80 | 10270 |
| 21 | 50 | 41 | 1910 | 61 | 5940 | 81 | 10420 |
| 22 | 75 | 42 | 2050 | 62 | 6200 | 82 | 10550 |
| 23 | 125 | 43 | 2190 | 63 | 6450 | 83 | 10670 |
| 24 | 175 | 44 | 2350 | 64 | 6710 | 84 | 10770 |
| 25 | 225 | 45 | 2510 | 65 | 6970 | 85 | 10860 |
| 26 | 275 | 46 | 2670 | 66 | 7220 | 86 | 10940 |
| 27 | 335 | 47 | 2850 | 67 | 7480 | 87 | 10990 |
| 28 | 395 | 48 | 3030 | 68 | 7730 | 88 | 11040 |
| 29 | 455 | 49 | 3220 | 69 | 7980 | 89 | 11060 |
| 30 | 550 | 50 | 3410 | 70 | 8220 | 90 | 11070 |
| 31 | 650 | 51 | 3610 | 71 | 8460 | 91 | 11070 |
| 32 | 775 | 52 | 3820 | 72 | 8700 | 92 | 11070 |
| 33 | 900 | 53 | 4040 | 73 | 8930 | 93 | 11070 |
| 34 | 1025 | 54 | 4260 | 74 | 9150 | 94 -100 | 11070 |
Jeevan Umang Premium and Complete Benefit Calculator
Jeevan Umang Online Premium and Benefits Calculator provided below can help you to understand all the benefits of the plan. You can provide your own details and get details such as Premium, Insurance Coverage, Survival Benefit details, Maturity Amount, Surrender value etc.
The bonus rate during the premium paying term is taken as per the latest declared bonus rates and the final addition bonus rate is taken as per the rates expected at 8% gross investment return scenario
*The calculations and the expected bonus rates provided in this article are intended to help in understanding the details of the plan. The rates provided are not guaranteed and can vary based on the experiences of LIC of India. Please refer LIC web site for more details.
Read more:
Five unique features of Jeevan Umang Plan which you may not know
Anish L J is a ‘Financial Planner’ and member of Chartered Insurance Institute(CII), London and Insurance Institute of India. He is also a finance, insurance and software consultant. He thoroughly follows the developments in finance, insurance, and other related sectors.
Your Surrender chart value is very high & Lic chart value very low. there is major difference
As per LIC the simple reversenary bonus will be paid for the PPT only as per the experience of the LIC your illustration is showing the bonus to the entire term, and also the benefit illustration is showing crores of rupees at time of maturity. I think that the FAB is one time declared bonus depend on term of the insurance contact. Please clarify the doubt regarding bonus. Sreehari mobile 9849850098. Thank you
Simple Reversionary Bonus is paid for the entire term of the policy and not for the PPT. FAB is one time additional bonus paid as per the rate declared at the year of maturity and paid along with maturity.
Each policy is different and the conditions are also different. In Jeevan Umang plan bonus available during the term premium paying term as well as the term after it. But the rates are different. Bonus during ppt is the simple reversionary bonus and bonus after the term will be specially declared as differential bonus rates. As deferential bonus rates are not declared so far, (as ppt is not over for any policy) we have assumed the expected bonus rates as per the benefit illustration provided by LIC.
Check again in lic sales brochure or policy document they are particularly mentioned that VSRBonus will be added to the policy only for PPT not for entire term, no bonus after ppt, lic is providing bonus after ppt for padup policies that to paid-up value is more than 2,00,000/_, why because the minimum sum assured is 2,00,000 in this plan, please correct your information, they have not mentioned any deferential bonus after ppt, provide correct information don’t mislead the people, G. SREEHARI 984
9850098 Iciciprulife (consultant trainer) Thank you,