In this article, we will demystify LIC Jeevan Labh Policy – 936 and understand its key elements to provide you with an in-depth understanding of the product. With this article, you would be able to make an informed decision that best aligns with your financial goals and insurance needs.
Features of LIC Jeevan Labh Policy
The salient features of the LIC Jeevan Labh policy are mentioned below -
- Limited Premium Payment for Extended Protection: The LIC Jeevan Labh policy is designed in a manner to allow policyholders to enjoy a long-term safety net by only paying premiums for a limited period. This unique feature makes the policy attractive for those seeking substantial coverage over an extended duration.
- Loan Facilities: A distinct advantage of this policy is the availability of the loan facility to policyholders after two years of regular premium payment. This loan amount is restricted to 90% of the policy's surrender value and offers financial support during emergencies.
- Flexibility in Benefit Payouts: The LIC Jeevan Labh policy offers a unique flexible payout system. Policyholders have the opportunity to receive death and maturity benefits in instalments over 5, 10, or 15 years, which ensures steady income support.
- Premium Waiver Benefit for Child Policies: The policy offers the provision of adding LIC’s Premium Waiver Benefit Rider when the policy is purchased for a child. In case of the parent's untimely demise, future premiums are waived off by LIC, relieving the child from the financial responsibility of keeping the policy active.
- Premium Rebates: The policy offers a cost advantage with premium rebates on a sum assured of Rs.5 lakhs and above, encouraging policyholders to aim for higher coverage.
- Grace Period: LIC Jeevan Labh Policy extends a grace period of 15-30 days to pay any overdue premium, reducing the risk of policy lapse due to delayed payments.
- Free Look Period: Policyholders have the right to return the policy within the initial 15 days if they find the terms and conditions unsatisfactory, ensuring transparency and satisfaction.
- Acquisition of Surrender Value: After the payment of premiums for at least two full policy years, the LIC Jeevan Labh policy acquires a surrender value. The surrender value paid to policyholders will be the greater amount between the Guaranteed Surrender Value or the Special Surrender Value, which is determined as per the total premium paid, the policy term, and the year of surrender.
- Acquisition of Paid-Up Value: In case the policyholder is unable to continue paying premiums after at least two years of regular payment, the policy attains a paid-up status. The sum assured then gets reduced in proportion to the premiums paid. The formula for the reduced paid-up sum assured is this: (Number of premiums paid/total number of premiums to be paid) x sum assured on death or maturity.
Benefits of LIC Jeevan Labh Policy
Let’s take a look at the key benefits of LIC Jeevan Labh Policy -
- Death Benefit Provision: In the unfortunate event of the policyholder's demise during the policy term, the LIC Jeevan Labh plan provides a death benefit to the nominee. The death benefit is calculated as the greater of the following amounts - the basic sum assured or seven times the annualised premium. Furthermore, this policy enhances the final death benefit by adding a vested simple reversionary bonus and a final additional bonus if applicable.
- Maturity Benefit Offered: The LIC Jeevan Labh policy provides a maturity benefit when the policyholder survives the entire policy term and fulfils all premium payment obligations. The maturity benefit includes the basic sum assured, augmented by a vested simple reversionary bonus and a final additional bonus (if any), providing a significant financial return at the end of the policy term.
- Tax Relief Opportunities: Investing in the LIC Jeevan Labh policy also offers the benefit of tax savings. The premiums paid towards this policy, up to a maximum limit of Rs.1.5 lakh per financial year, qualify for tax deductions under Section 80C of the Income Tax Act. Additionally, the proceeds received upon the policy's maturity are tax-exempt under Section 10(10D) of the Act, ensuring that policyholders retain the entirety of their benefits.
Eligibility Criteria for Jeevan Labh Policy
You are required to fulfil the following eligibility criteria before opting for the LIC Jeevan Labh policy -
- Age of Entry: The LIC Jeevan Labh policy accepts applicants as young as 8 years, making it a versatile choice for long-term planning. The maximum entry age, however, is contingent on the policy term chosen. For a policy term of 16 years, applicants can be up to 59 years old. For a policy term of 21 years, the upper age limit is 54 years. On the other hand, for a term of 25 years, applicants should not be older than 50 years at the time of policy initiation.
- Sum Assured: The policy offers a broad range of coverage options, with a minimum sum assured set at Rs. 2,00,000. However, there's no cap on the maximum sum assured.
- Maturity Age: While the policy does not specify a minimum maturity age, it mandates a maximum maturity age of 75 years. This means that irrespective of the entry age and policy term, the policy should mature before or at the age of 75.
- Policy Term: LIC Jeevan Labh policy offers three distinct policy term options to cater to diverse investment horizons. The available policy terms are 16 years, 21 years, and 25 years, providing policyholders the flexibility to align their insurance and investment goals with their life stages.
- Premium Paying Term: Aligned with the policy term, the plan offers varied premium payment terms of 10, 15, and 16 years. These options enable policyholders to pay off their premium commitments in a defined timeline while enjoying the benefits of the policy over an extended term.
Documents Required for LIC Jeevan Labh Plan
When applying for the LIC Jeevan Labh plan, make sure to have the following crucial documents at your disposal:
- Fully Completed Application Form: Applicants need to submit a properly filled-out proposal form or application form. The form should be completed in all respects with accurate and comprehensive information.
- Proof of Address: Valid documents to confirm your residential address are necessary. These could include documents such as a utility bill, passport, voter's ID, or any other official documents that state your current address.
- Know Your Customer (KYC) Documents: As a part of the application process, it's essential to provide KYC documents. These typically include identification and proof of citizenship documents like your Aadhaar Card, PAN Card, and tax details among others.
- Age Verification: You'll need to submit documentation to verify your age. This might include documents like your birth certificate, passport, or school leaving certificate that clearly states your date of birth.
- Medical Diagnosis Reports (if Necessary): Depending on the sum assured and your current health status, you may be required to undergo medical tests. In such cases, the reports from these medical examinations will be needed as part of the application process.
- Medical History: Applicants are often required to submit a detailed medical history. This includes information about any previous or current health conditions, any treatment received, and lifestyle details. These factors are essential as they influence the underwriting decision and premium calculation.
How LIC Jeevan Labh Policy Works?
Let's consider a scenario where Abhinav, a 30-year-old individual, plans to buy the LIC Jeevan Labh policy with the following coverage details:
- Basic Sum Assured (BSA) – Rs.10 Lakhs
- Policy Term - 21 years
- Premium Paying Term - 15 years
- LIC Bonus Rate for Jeevan Labh 936 in 2020-21 – Rs.44 per Rs.1,000 BSA
With these parameters, using the LIC Jeevan Labh Calculator, Abhinav's annual premium would be Rs.54,707.
In case of Abhinav's untimely demise during the 10th year of the policy, the death benefit would be calculated as follows:
- The insurer would pay out the higher of 7 times the annual premium (7 x 54,707 = Rs.3.82 Lakhs) or the BSA (Rs.10 lakhs). In this case, the nominee will receive the latter since it is greater.
- Over a decade, the accumulated bonus would be Rs (44 x 10,00,000/1,000) x 10 = Rs. 4.4 Lakhs.
- Consequently, the total death benefit to Abhinav's family would amount to Rs (10,00,000 + 4,40,000) = Rs. 14,40,000.
However, if Abhinav outlives the entire policy term of 21 years, the maturity benefit would be as follows:
- He would receive the BSA (Rs.10 Lakhs) in addition to the accrued bonuses.
- The total bonus accumulated over 21 years would amount to Rs (44 x 10,00,000/1,000) x 21 = Rs.9.24 Lakhs.
- At the end of the 21-year policy term, Abhinav would be eligible to receive a final maturity value of Rs.19.24 Lakhs.
LIC Jeevan Labh Riders
Riders, in the realm of insurance, refer to add-ons or supplementary covers that can be attached to a basic insurance policy. These additional features allow the policyholder to enhance their primary coverage to cater to specific needs and risks beyond what's offered in the core policy. By paying an extra premium, you can take advantage of the enhanced protection offered by these riders.
The LIC Jeevan Labh policy allows you to enhance your insurance coverage with 5 optional riders:
- Accidental Death and Disability Benefit Rider: This rider provides additional financial protection in case an accident results in the policyholder's death or disability. If the insured individual dies due to an accident, the beneficiary receives an additional accidental death benefit along with the basic sum assured. In case of permanent disability resulting from an accident, future premiums are waived and an additional disability benefit is paid out over a specific period.
- Accidental Benefit Rider: This rider provides an additional sum assured in case of accidental death of the policyholder, further increasing the financial safety net for their dependents.
- Term Assurance Rider: This rider adds an extra layer of financial security by offering an additional death benefit in case the policyholder passes away during the policy term. This extra amount is paid along with the regular death benefit of the base plan.
- Critical Illness Rider: This rider offers a lump-sum amount upon the diagnosis of any of the predefined critical illnesses like heart attack, stroke, cancer, and others covered under the policy. This can provide financial support for treatment costs and help manage financial stability during a challenging time.
- Premium Waiver Benefit: Under this rider, if the policyholder suffers a permanent disability due to an accident, future premiums are waived while the policy continues with all benefits. This rider is particularly useful in maintaining the policy benefits, especially in the face of financial distress caused by a disability.
Exclusions of LIC Jeevan Labh
In the LIC Jeevan Labh Plan, certain scenarios constitute exceptions where no coverage is provided by the policy. This specifically applies to the unfortunate event of the life assured committing suicide.
- Suicide Within First Policy Year: If the life assured tragically decides to end their own life within one year from the commencement of the policy, the LIC Jeevan Labh Plan will not pay the full death benefit. Instead, the beneficiary will receive a return of 80% of the total premiums paid until that date. This is to dissuade policyholders from seeing life insurance as a means of leaving financial support after an act of suicide.
- Suicide After Policy Revival: If the life assured commits suicide after one year of policy revival, the payout structure changes. The nominee will receive either the policy's acquired surrender value or 80% of the total premiums paid to date, with the higher amount being offered. This clause ensures at least some financial support to the beneficiary.
LIC Jeevan Labh Plan stands out as a sound financial planning tool with its dual benefits of life insurance and savings, making it an excellent choice for individuals seeking a long-term, disciplined savings mechanism while ensuring family protection. However, it is always advisable to understand one's insurance needs, risk profile, and financial objectives before investing in any insurance product. With careful planning and consideration, the LIC Jeevan Labh Plan can indeed be a valuable addition to one's financial portfolio.
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