Jeevan Aastha is the new insurance policy by LIC (Life Insurance Corporation of India) that is being much talked about offlate. I went through LIC’s website to understand the product better.
Before taking up the policy, there are a couple of things one should keep in mind. 
One should clearly understand the difference between Basic Sum Assured and Maturity Sum Assured. For this policy, Basic Sum Assured is 6 times the Maturity Sum Assured. Also, it may be noted that Basic Sum Assured is applicable for the first year of the policy. Apart from these two terms, there is also ‘Guaranteed Return‘ in case of death or policy maturity upon survival. LIC has put up benefit illustation details as well. Let us understand what this means in lay man terms with respect to what is good and what is not.
First the Good:
1. Tax benefit under Sec 80C on initial premium.
2. Maturity benefit is non taxable under Sec 10(10D)
3. On death during the first policy year.
4. Guaranteed Addition at two rates for 5 and 10 year terms.
5. Loyalty Addition – a variable component based on company performance.Keeping aside LIC’s service quality and track record in claim settlement, here comes the bad:
1. Guaranteed additions are not on the Basic sum but on the Maturity Sum assured.
2. Insurance benefit decreases drastically after first year.
3. This policy looks like more of an Investment scheme than an Insurance cover.Now lets see the returns of Jeevan Aastha in comparison with Fixed Deposits and PPF.
Plan (for an individual of 31 yrs) Investment
AmountReturn Amount Risk on 10th year 10th year on maturity LIC’s Jeevan Aastha 53,625 1,65,000 1,07,184 Fixed Deposit 53,625 1,05,814 1,15,338 Public Provident Fund (PPF) 53,625 1,01,525 1,10,155
Disclaimer: I am neither an insurance agent nor an investments advisor. All the info provided in this article is based on my understanding of the policy after going through LIC’s website.
Niyati Katial says
Can someone explain me what is the difference between BASIC SUM ASSURED & MATURITY SUM ASSURED?
@Rajeev
@ Rajeev: Can you help me with the Link of the article you have mentioned
Chetan says
This does not look like a promising instrument in my asset column. I would prefer PPF as it yields 8% compound interest. Jeevas Astha clearly mentions Loyalty Additions will be given only on the basis of company’s performance.
“PPF > Jeevan Aastha”
Chetan says
This does not look like a promising instrument in my asset column. I would prefer PPF as it yields 8% compound interest. Jeevas Astha clearly mentions Loyalty Additions will be given only on the basis of company’s performance.
“PPF > Jeevan Aastha”
Rajeev says
I believe there is an article in today’s times-of-india (bangalore edition) which compares this policy with NABARD and one other from Tamilnadu bonds.
Suman says
@ Vijay, Ashish
I agree with the fact that ELSS tax-saving funds are capable of delivering better returns. However, the catchword here is ‘Guaranteed”. I have lost some of my risk appetite in last one year and would prefer safe investment like Jeevan Aastha(with assured return) over equity-linked ones (unpredictable returns). Also, my tax-saving requirements are fulfilled through instruments like PF/PPF etc, so I am not looking at tax-saving per se and rather tax-free returns upon maturity.
On TDS, it does not matter whether banks would deduct TDS or no, but on any FD interest income is taxable.
Selva says
It is a common misconception that people think they have been insured 6 times the premium amount through out the term. This is not true. Insured amount is 6 times only for the first year. Be aware of this. Many LIC agents are mis-guiding people on these lines. If you are not aware, this is for your information! Insurance agents would pocket Re. 0.30 of the Re. 1 you would invest with LIC.
Selva says
It is a common misconception that people think they have been insured 6 times the premium amount through out the term. This is not true. Insured amount is 6 times only for the first year. Be aware of this. Many LIC agents are mis-guiding people on these lines. If you are not aware, this is for your information! Insurance agents would pocket Re. 0.30 of the Re. 1 you would invest with LIC.
arun says
@GAUTAM RAY
Mohan has already indicated about this loyalty addition in his review. However, there is no clarity on how much LIC would return as Loyalty addition as it depends on the company performance.
GAUTAM RAY says
dear Vijay , you have no idea about loyalty addition that is also there . have u any idea ? LIC gives very good loyalty addition . so first go through and then pass comment .
Ashish says
Do not get fooled by this scheme. My in laws work in Sate Bank of India and this is what they explained. Its better opening an FD in any bank for 5 years as long as the amount is less than 1,00,000/=. This is because bank will give you a return of 9% compound interest ( as against LIC’s 7% ). Also, the bank FD will not come under TDS as TDS applies to interests of Rs 10,000/= per annum and more ! Got it ?? LIC sucks…. go for bank FDs.
VIJAY says
@Suman
you should invest into Tax saver mutual fund of Birla sun life tax relief’96 without any hesitation specially for 5 years period
@Shankar
dear if your age is less than 40 years than you must save your tax by investing into tax saving mutual funds which also gives the benefit of tax on maturity with tax free returns….jeevan asatha will provide you cover of rs. 1 lac only which is not very attractive at this return of 9% simple interest…..you can take an term insurance of rs. 1 lac by paying rs. 200 only…so why shoul compromise with returns……you should not buy peanuts in the price of almond…..
@Kunal
daer kunal you please check the returns of ELSS mutual fund schemes for last 10 years….Birla sun life tax relief’96, sbi magnum tax gain, icici prudential tax paln, princial personal tax saver…..you’ll find your answer…
@sally
yes its foolish to invest into jeevan astha plan because its not an insurance plan…you have lot of other much better investment options for tax saving u/s 80 C…..the best option is ELSS mutual funds…..
VIJAY says
don’t you think it’s not the right time to invest into this policy….if anybody wants to save tax he/she must invest into ELSS Tax saving Mutual funds at this point of time because equtiy is available at very cheap rate..last year when the equtiy were on very high side LIC has promoted and sold millions of market plus (ULIP) policies…but at this time when market is very much attractive then LIC and other companies are selling and promoting fix return plans…..i’m sure ELSS mutual funds can give much more returns than LIC Jeevan Asatha plan. so one should invest into ELSS mutual funds of Birla Sun Life Tax Relief’96, ICICI Pru Tax Plan, sundaram BNP Paribas Tax Saver, SBI Magnum Tax saver Fund……these funds are having tremendous track record of returns….even after so much fall into market still 5 years market returns are into positive side…..
Suman says
I am interested to invest in Jeevan Aastha purely from tax-free investment perspective. I fall under the 30% income tax bracket and for any bank FD with 5 year’s tenure (interest rate of 9.75% or so), the effective rate of return will be less than 7% (even with all annual or quarterly compoundings. With jeevan Aastha (5 years, @9% simple rate on Maturity Sum assured which is 1/6th of Sum assured), the effective return will be around 8.6%. Makes perfect sense , right ?
Amit says
@Raj
What is the rate of interest of FD you have considered.
Amit says
@Raj
What is the rate of interest of FD you have considered.
Shankar says
@Mohan
I have made up my mind to invest in LIC Jeevan Aastha. Though all the 3 instruments like FD, PPF and LIC are giving more or less the same returns, only in PPF and LIC we have the tax benefit after maturity. Another add on is Jeevan Aastha provides insurance cover. Hence I see all advantages with LIC’s investment policy.
bhushan says
@Vashishth
in ppf you can invest only 70000 per annum. In LIC this limit is very high. In LIC entire amount is available after maturity; in ppf I believe its not.
Mohan says
@sally
Like I had mentioned earlier, I am not an investment advisor. However, this is my personal opinion.
The interest rate on the PPF has been gradually lowered over the years (much to the dismay of millions of investors). It was initially 12% per annum. It dropped to 11%, then 9.5% and is now 8%. This rate of interest is fixed (and changed) by the government. The decline in the PPF’s interest rate was in keeping with the change in the economy. Interest rates have decreased over the years and it was only natural that the PPF followed suit.
Also, the limit that you can put your money into PPF is Rs. 1 lakh since that is the max cap under section 80C. When you think of Jeevan Aastha, it is not only promising the ‘Assured Returns’, but also an insurance component to the money you are going to invest. So, it is your take, you need to consider all these factors and make the best choice.
sally says
Sir,
please let me know if i can put 25000 in jeevan aastha. I alsi have ppf account and put 70k per year. i fall in tax bracket.
will it be foolish to invest in jeevan aastha as some comparison says PPF is better. but i cant invest more in ppf also. should i go for FD or jeevan aastha.
please respond
raj says
@Vashishth
How can any aspect of PPF fill for life insurance risk
The main article mentions about risk on 10 th Year FD . Can you tell me which FD provides Life cover?
Dharmesh says
Hi Vipul,
LIC’s Jeevan Aastha is a single premium policy – meaning you will have to pay premium upfront, only once. This is just liks an FD wherein you pay the principal amount only once.
At the end of the selected tenure (5 or 10 yrs) you will get Maturity Sum Assured + Guareented Additions + Loyalty Addition. For FD, you will get back Principal + Accured Interest at the end of the selected tenure.
One catch in Jeevan Aastha is Loyalty Addition, which is variable & can be a decider between this policy & FD. If the Loyalty Addition is equal to the amount mentioned in benefit illustration (on http://www.licindia.com) the returns from this policy turns out to be higher that post tax FD returns for the same tenure. If Loyalty Addition is any lesser, it depends on which tax bracket you fall in cos FD interest will be taxed depending on your tax bracket.
Dharmesh says
Hi Vipul,
LIC’s Jeevan Aastha is a single premium policy – meaning you will have to pay premium upfront, only once. This is just liks an FD wherein you pay the principal amount only once.
At the end of the selected tenure (5 or 10 yrs) you will get Maturity Sum Assured + Guareented Additions + Loyalty Addition. For FD, you will get back Principal + Accured Interest at the end of the selected tenure.
One catch in Jeevan Aastha is Loyalty Addition, which is variable & can be a decider between this policy & FD. If the Loyalty Addition is equal to the amount mentioned in benefit illustration (on http://www.licindia.com) the returns from this policy turns out to be higher that post tax FD returns for the same tenure. If Loyalty Addition is any lesser, it depends on which tax bracket you fall in cos FD interest will be taxed depending on your tax bracket.
Mohan says
@Vipul Darji
I think you have NOT understood the Jeevan Aastha policy properly. It is a one time premium policy which ends on or before 21st Jan 2009. There is no option of investing on a yearly basis in this policy.
Vipul Darji says
It seems that LIC only making Guaranteed Return illustation taking some assumption which are of variable in nature and which is always confusing for lay man to understand & if you require to clarify detail from LIC agent they often tried to mislead you by hiding some of the fact or misleading by making false claims
Pls Let me know? – If i invest Rs.30000 every year for 5yr in jeevan aastha does LIC Convey in there policy document (like FD’s) that after maturity i will get the principal amt+ interest in written ?
ssv says
If I am already putting the maximum amount in PPF annually and am in a high tax bracket (taxes would be high on FD’s). Would it make sense to invest in this vehicle, specifically if I want to say invest 10Lakhs as premium. Or any other suggestions for a 100% safe investment.
Shrinidhi Hande says
While the review was good, comments added much more value bringing out hidden aspects… Good work..
Mohan says
@Raj
Thanks for putting up comparative amounts. I have updated the post with your inputs.
Mohan says
@Raj
Thanks for putting up comparative amounts. I have updated the post with your inputs.
Kiran says
@Raj
Very good comparison. Thanks Raj.
MY LIC India says
@Raj
Good comparison. That makes sense.
Raj says
@Sudheer S
If you are a 31 year old person and invest 53,625 in FD, PPF and Jeevan Asta for 10 years simultaneously today. After 10 years you will get 1,15,338 from FD, 1,10,155 from PPF and 1,07,184 from LIC. If risk occurs with 12 months, your family gets 53625 from FD, 53625 from PPF and 3,30,000 from LIC. If risk occurs at 10th year your family will get 1,05,814 from FD, 1,01,525 from PPF and 1,65,000 from LIC. Now you decide which suits your requirement best.
Raj says
@Sudheer S
If you are a 31 year old person and invest 53,625 in FD, PPF and Jeevan Asta for 10 years simultaneously today. After 10 years you will get 1,15,338 from FD, 1,10,155 from PPF and 1,07,184 from LIC. If risk occurs with 12 months, your family gets 53625 from FD, 53625 from PPF and 3,30,000 from LIC. If risk occurs at 10th year your family will get 1,05,814 from FD, 1,01,525 from PPF and 1,65,000 from LIC. Now you decide which suits your requirement best.
Mohan says
@Jagan Nair
@Chintan
Yes, your arguments look very valid!
@Satyabhama
Good catch. Certainly that is where you need to learn about differentiating between an insurance and a fixed deposit. Here you get Insurance while in FD you get the interest 🙂
Satyabhama says
Another bad point in jeevan aastha is its surrender value. I came to know from an officer in lic that the surrender value is jeevan aastha at any time is less than the premium paid. It is too bad. If in bank f d any person wants to terminate his deposit he will get his deposit amount plus a reduced interest rate, but in jeevan aastha he will receive only 90% of single premium paid and no interest what so ever. This is tooooooooooooo baaaaaaaaaad.
Chintan says
The hype of giving 100 rs bonus for every 1000 sum assured is only for the maturity sum assured.
Suppose you are taking a policy for 6 lacs, then maturity sum assured is 1 lac and yearly bonus of 10,000(10%) will be accrued to your account and NOT 60,000. Also on casualities, only 1/3rd of the basic sum assured + bonus is given and not the entire sum assured. So this is purely a investment product from LIC and brokers will definitely mislead the customers with 10% addition on basic sum assured. So dont get deceived.
Jagan Nair says
An FD for 10 years in current rate scenario gives you 9% and thus 2.36 x (multiplier) . So a simple FD works better than this policy. To avoid TDS, you can always split your FD n deposit them in diff accounts. So rethink before you sign up for this policy.
Jagan Nair says
An FD for 10 years in current rate scenario gives you 9% and thus 2.36 x (multiplier) . So a simple FD works better than this policy. To avoid TDS, you can always split your FD n deposit them in diff accounts. So rethink before you sign up for this policy.
Mohan says
@Vashishth
Yes, though PPF yields almost the same, insurance cover is what the add on you get with Jeevan Aastha.
@abilash
Since LIC is publishing the terms and conditions as well as the returns etc., I don’t think LIC is misleading. However, the onus is on the person who wishes to invest in LIC to completely understand the policy better and the set the record straight than feeling sorry at later time.
abilash says
LIC seems to follow a deliberate policy of misleading innocent investors. They say 9.5% and 10 5 Guaranteed Returns every year. This is less than 7% Annual Compounding. In terms of actual returns jeevan Aastha is inferior to its competitors. Secondly the drastic reduction in the Sum Assured from Year 2 onwards is yet another instance of misleading the public. Thirdly every one knows LIC is on the downhill. The management hopes that somehow it will shore up its sinking position(IRDA Monthly reports) by peddling investment schemes as insurance schemes.
SHAME!
abilash says
LIC seems to follow a deliberate policy of misleading innocent investors. They say 9.5% and 10 5 Guaranteed Returns every year. This is less than 7% Annual Compounding. In terms of actual returns jeevan Aastha is inferior to its competitors. Secondly the drastic reduction in the Sum Assured from Year 2 onwards is yet another instance of misleading the public. Thirdly every one knows LIC is on the downhill. The management hopes that somehow it will shore up its sinking position(IRDA Monthly reports) by peddling investment schemes as insurance schemes.
SHAME!
Vashishth says
“Jeevan Aastha is not better than PPF as investment vehicle:”
One direct observation is that Jeevan Aastha gives “Simple” interest. If you put your money in PPF account that gives compounded interest of 8% p.a. (compounded annually), you will get the same benefit in 9 years (1 year earlier than Jeevan Aastha). PPF yields are also tax-free.
Only thing better is that there is a little insurance that PPF does not have. So, for investment purpose PPF is better, but for additional & little insurance Aastha looks better – Take your pick!!!
Mohan says
@Sudheer S
@Ved Prakash
@Sivaji Ganganathan
Good summarization! Thanks 🙂
@Chitra
Sure, glad that my article made you understand it better!
@Kunal
Again, individual perceptions and the need based requirements are the deciding factor. No doubt LIC is promising good returns through this plan.
@Amar
I have written a new post on IDBI’s Bondsurance plan. I have tried to compare and differentiate this plan with LIC’s Jeevan Aastha. Also included a sample calculations to understand them better. Go through that article. It might help you.
Amar says
I came across IDBI life insurance’s policy of similar nature. They have made it very clear that it is an investement policy with an insurance cover of 5 times what you pay as premium. They are also offering similar assured money towards the policy maturity. I am confused on which one to go for, any suggestions?
Kunal says
Me & my colleagues have reviewed this policy in detail in past few days. We concluded tat its a good “guaranteed” investment option, and better than an FD. The latter is because there are no tax liabilities on the returns unlike an FD. Moreover the annualised returns are also coming out to be more than that of an FD (by adding the 80C benefit + returns + bonus component).
Flip side is that for those who are under-insured there are better policies than this with greater time horizons.
Sivaji Ganganathan says
I would say it is timely for many of those who are planning for their year end tax submission. Most of the salaried employees need to submit their proof of investment within next two months. Keeping those people in mind and also to encash on the stiff economic conditions LIC has bought up this policy I belive.
What ever the reason may be, like mohan has mentioned I would take it as an investment stuff than as insurance 😉
Ved Prakash says
for me it looks like a good option to save your hard earned money from tax man. why to invest in other markets like stocks, mutual funds etc., this is a very good option which provides both assured money back plus insurance coverage.
Chitra says
Hey Mohan, Thanks for the detailed review. My dad was talking about this policy few days ago. I never bothered to find out more. Now I have good amount of info to tell my dad. Thanks for putting both good and bad sides of this policy together.
Sudheer S says
This is what I conclude from your review. It is a nice policy if you want don’t know where to park your money safely for 5 or 10 years with assured at a simple interest of 7% pa. I agree with you in saying that it is more of a investment policy than an insurance cover.
Sudheer S says
This is what I conclude from your review. It is a nice policy if you want don’t know where to park your money safely for 5 or 10 years with assured at a simple interest of 7% pa. I agree with you in saying that it is more of a investment policy than an insurance cover.