Being a disciplined investor pays off in the long run. For example, those investing in equity mutual funds through Systematic Investment Plans (SIPs) or debt instruments such as post office or bank deposits through recurring plans reap richer benefits in the form of higher growth and returns. However, maturity benefits in these plans remain limited to the returns assumed and to the total instalments paid in case of the unfortunate event of death. ‘LIC Jeevan Saral’ – an innovative offering by Life Insurance Corporation of India – takes care of this point. The endowment assurance plan provides not only financial protection in terms of death benefit throughout the term but also long-term capital growth. One of the unique features of the scheme is it provides risk coverage to the extent of 250 times the monthly premium. No wonder, it helped LIC win the Golden Peacock Innovative Product/Service Award 2009.

Product highlights/benefits
• An endowment assurance plan that provides death benefit up to 250 times the monthly premium plus loyalty additions, if any
• Flexibility to choose premium amount which will in turn decide maturity sum assured
• Minimum monthly premium of Rs. 250 and Rs. 400 for entry age up to 49 years and 50 years and above, respectively. There is no cap on upper investment limit.
• Option to add Death Accident Benefit rider at a very nominal cost
• Loyalty additions if the policy is in force for a minimum of 10 policy years along with guaranteed maturity benefits
• No surrender penalty after 5 policy years; partial withdrawals allowed
• Premiums are payable yearly, half-yearly, quarterly, or monthly.

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Analysis
LIC Jeevan Saral is a unique investment option which cushions one’s investments against the dual risks of death and volatile market conditions and at the same time provides much-needed liquidity. Let us see how this works for a 35-year-old individual.
Suppose the person buys LIC Jeevan Saral policy for an annual premium of Rs. 4,704 for 25 years, with his basic sum assured coming to Rs. 1 lakh. His guaranteed maturity benefit as per LIC benefit illustration will be Rs. 1,35,296, which will further increase to Rs. 2,00,296 and Rs. 3,46,296 if we include loyalty additions and guaranteed maturity benefit at a projected investment rate of return (PIRR) of 6 per cent and 10 per cent, respectively. The net yields at different projected levels are presented in Table 1.

The net yields under LIC Jeevan Saral at the PIRR of 6 per cent and 10 per cent come to 4.16 per cent and 8.05 per cent, respectively.

Equating with other products
Apart from insurance cover, ‘Jeevan Saral’ provides tax benefits and liquidity, so we will compare it with products like recurring deposits (RDs) by post office/banks or PPF (periodic investments) that offer similar benefits. Table 2 depicts how LIC Jeevan Saral and recurring deposits fare against each other.

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Now, we will turn to Table 3 which analyses the performance of two products, RDs and PPF, in comparison with Jeevan Saral. Here, we have assumed that PPF and RD investments continued for 25 years, i.e., returns reinvested throughout the term.

• In case of Jeevan Saral, a 25-year old with an annual investment of Rs. 4,704 at a projected growth rate of 10 per cent (which may or may not be achievable) will earn a net yield of 8.05 per cent, higher than RD (5.94 per cent) and PPF (8.00 per cent).
• In case of RDs, we have considered investors in the tax bracket of 20 per cent. The returns may come down or go up for those in the 30 per cent or 10 per cent tax bracket.
• For PPF investments, the tax-free return comes to 8 per cent. Nevertheless in terms of death benefit, with its inbuilt risk cover Jeevan Saral scores over the other two.
• If the same individual buys a term plan at a premium of Rs. 4,704 for a period of 25 years, he would get an insurance cover of Rs. 16 lakh. But note that there won’t be any maturity benefit, but only death benefit of Rs. 16 lakh.

Tax benefits
• Premium payable for Jeevan Saral and PPF is eligible for tax benefits under Section 80C.
• Maturity proceeds of Jeevan Saral are tax free under Section 10(10D).
• Investments in RDs are not eligible for tax benefits.

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Things to look into
• Returns in LIC Jeevan Saral as shown in Table 3 are calculated at a projected growth rate of 6 per cent and 10 per cent, which may or may not be achievable.
• Loyalty additions or bonuses are not guaranteed.
• RDs or PPF investments do not provide risk cover.

Recommendations
• For whom: Conservative investors willing to put money for a longer period
• Risk: Capital safe, but loyalty benefits linked to market returns
• Investment horizon: 5 -25 years
• Returns: Moderate in line with FDs/PPF at different conditions
• Beats inflation: No, it won’t be able to beat inflation at assumed growth rate of 6 per cent
• Tax bracket: Preferable for all tax brackets
• Alternatives: Recurring deposits, PPF (periodic investments), mutual funds (SIPs)

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Summing it up
LIC Jeevan Saral will always remain in demand considering that periodic investment schemes have never been out of fashion for small investors. The other draws would be LIC’s proven track record of paying out loyalty bonuses and the decent net return at a projected rate of return of 6 per cent besides the risk cover. However, those looking for a guaranteed return can choose RD or PPF along with a term plan which will provide risk cover at a very nominal premium.

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