Top three reasons to invest in Jeevan Shiromani = Decent tax-free return + 1 Crore Life & Critical illness cover + Short premium term.

LIC is launching a new money back plan LIC Jeevan Shiromani Plan 847 on 19th December 2017.AssuredGain’s expert reviewns of LIC Jeevan Shiromani Plan 847.

It is a non-linked, with profits, limited premium payment money back plan. LIC has designed especially to target the HNIs (High Networth Individuals). This plan also provides you critical illness cover also.

Eligibility of LIC Jeevan Shiromani Plan 847

First, let us see the eligibility condition of LIC Jeevan Shiromani Plan 847.

As LIC is claiming, the minimum sum assured under this plan is Rs.1 Crore. Hence, this is not meant for any ordinary earning individual.

Features of LIC Jeevan Shiromani Plan 847

Along with above-said eligibility conditions, this plan offers the below features.

Unlike the typical traditional plans of LIC, this plan will be eligible for paid-up immediately after the 1st year completion of policy. For all other policies of LIC, paid up feature will be applicable if you paid the premium for at least 3 years.
As the policy is eligible for paid up after a year, you are eligible to surrender the policy immediately after the 1st year completion.
You can avail the loan after a year of the policy.
Along with inbuilt Critical Illness rider, this plan offers another 3 types of riders and they are Accidental Death and Disability Benefit Rider, Accident benefit rider, New Term Assurance Rider. However, including critical illness rider, you can opt for the maximum of 3 riders ONLY.
You can pay the premium yearly, half-yearly, quarterly or monthly.

Benefits of LIC Jeevan Shiromani Plan 847

Now let us see the benefits available under LIC Jeevan Shiromani Plan 847.

This plan offers the guaranteed addition. For the first 5 years, the guaranteed addition will be Rs.50 per Rs.1,000 Sum Assured.

From 6th year onward to till policy maturity, this plan offers the guaranteed addition of Rs.55 per Rs.1,000 Sum Assured.

Death Benefits of LIC Jeevan Shiromani Plan 847

There are two conditions to pay the death benefits under this plan and they are as below.

a) Death during the first 5 years of policy period

If death occurs during the first 5 years of the policy period, then the benefit is as below.

Sum Assured on death+Guaranteed Addition at Rs.50 per Rs.1,000 Sum Assured.

b) Death from 6th year to policy maturity date

Sum Assured on death+Guaranteed Addition (for first 5 years Guaranteed Addition will be at Rs.50 per Rs.1,000 Sum Assured and from 6th year onward it will be Rs.55 per Rs.1,000 Sum Assured)+Loyalty Addition.

Meaning of “Sum Assured on Death” is defined as HIGHER of the below.

10 times of your annual premium (excluding taxes, the extra amount due to underwriter decisions or rider premium)
125% of Basic Sum Assured.
105% of all the premiums paid as on date of death.

You can also defer the death benefits payable to your nominee in installments rather than a lump sum payment is chosen over the period of 5 yrs, 10 yrs or 15 yrs. This can be exercised by the policyholder during his lifetime only. Based on this, the nominee will receive the death benefits at a deferred period set by the policyholder. Nominee can’t alter this feature. This can be either % of the death benefit or absolute value of money.

Survival benefits of LIC Jeevan Shiromani Plan 847

If policyholder survives to each of the specified duration during the policy term, a fixed % of Basic Sum Assured will be payable. This fixed % is as below.

For 14 Yrs Policy-30% of Basic Sum Assured on each 10th and 12th policy year.
For 16 Yrs Policy-35% of Basic Sum Assured on each 12th and 14th policy year.
For 18 Yrs Policy-40% of Basic Sum Assured on each 14th and 16th policy year.
For 20 Yrs Policy-45% of Basic Sum Assured on each 16th and 18th policy year.

Like death benefit deferred benefit, this policy offers you to take the survival benefit at the deferred date (postponing the payment receivable). You can receive the survival benefit as per your with along with interest at a later stage of your requirement.

However, you have to defer this survival benefit up to policy maturity only. Before that, you have to receive this benefit along with interest. If you do not take this deferred survival benefit and interest before maturity, death or surrender, then LIC will pay this during maturity, death or surrender time along with interest.

The interest will be yearly compounding but the rate will be fixed by LIC from time to time.

You have to inform this deferred survival benefit receiving option 6 months prior to the actual due date of survival benefit. Otherwise, LIC will pay you the surival benefits as per the due dates.

Maturity benefits of LIC Jeevan Shiromani Plan 847

If policyholder survives up to the policy period, then he will receive the below benefits.

For 14 Yrs Policy-40% of Basic Sum Assured+Guaranteed Addition+Loyalty Addition.
For 16 Yrs Policy-30% of Basic Sum Assured+Guaranteed Addition+Loyalty Addition.
For 18 Yrs Policy-20% of Basic Sum Assured+Guaranteed Addition+Loyalty Addition.
For 20 Yrs Policy-10% of Basic Sum Assured+Guaranteed Addition+Loyalty Addition.

Let me explain the same of both survival benefits and maturity benefits in below sheet for your simple understanding.

Survival and Maturity Benefits under LIC Jeevan Shiromani Plan 847

Hope the benefits of LIC Jeevan Shiromani Plan 847 may be understood you now easily.

In this plan, you can defer your maturity benefit for future dates in installments. The periods available is for 5 years, 10 years or 15 years. This option can be exercised by policyholder only.

You can choose either % of net maturity amount or absolute value to be payable in installment for the next 5 years, 10 years or 15 years. LIC will pay you in advance of such installments. The installments available are yearly, half-yearly, quarterly or monthly.

The applicable interest on this installment will be declared by LIC from time to time.

The policyholder has to inform LIC 3 months prior to maturity date about this option. During such deferred maturity benefit period, if policyholder wishes to discontinue and interested to commute the remaining installments as a lump sum, then he can opt that.

If the policyholder dies during such deferred maturity benefit period, then the remaining installments will be payable to the nominee. The nominee has no rights to alter this deferred benefit installment option.

Inbuilt Critical Illness Benefits of LIC Jeevan Shiromani Plan 847

Along with the above-shared death, survival and maturity benefits, this plan also offers the inbuilt critical illness benefits.

On the first diagnosis of any one of the 15 Critical Illness as specified below, and also if the policy is in force, then the following benefits will be provided.

But before that let us first understand of what are those 15 critical illness which this plan covers. They are as below.

Cancer of specified severity
Open chest CABG
Myocardial infarction
Kidney failure requiring regular dialysis
Major organ/bone marrow transplant (as recipient)
Stroke resulting in permanent symptoms
Permanent paralysis of limbs
Multiple sclerosis with persisting symptoms
Aortic Surgery
Primary (idiopathic) pulmonary hypertension
Alzheimer’s disease/dementia
Blindness
Third-degree burns
Open heart replacement or repair of heart valves
Benign brain tumor

Once you are diagnosed with an above-said illness, then LIC will give you the below benefits.

a) Lump Sum Benefit:–

Inbuilt critical illness benefits equal to 10% of Basic Sum Assured will be payable subject to the following.

This benefit will be payable after LIC satisfied with the reports with specific deferment period (in respect to specific diseases). The benefit will be payable only once during the policy period.
A Survival period of 30 days is applicable from the date of diagnosis of critical illness. If death occurs during the 30 days period, then no critical illness benefit will be payable.
A waiting period of 90 days will apply from the date of commencement of risk or date of revival of risk (whichever is later). However, such waiting period is not applicable for accidental cases.

b) Option to defer the payment of premiums if there is a critical illness claim:-

If LIC accepted the critical illness claim, then you no need to pay the premiums for the next two years. LIC will not charge any interest on such delayed payment. However, if there is a survival benefit dues to be payable to policyholder during this 2 years period, then LIC will pay the survival benefit by DEDUCTING the premiums due.

c) Medical Second Opinion:–

Under this benefit, the policyholder has an option to take the second opinion from the LIC empaneled healthcare providers or through reputed hospitals in India based on the arrangement made by LIC.

Do remember that this facility is available only once during the policy period, for which you no need to pay the cost. The policyholder can take this second opinion immediately after informing LIC about the illness (without bothering about whether his critical illness benefit will be accepted or not).

However, such second opinion not involves any test. If you do the test, then you have to bear the cost of that.

Also, such second opinion is purely based on the facilities and recommendations LIC provide.

Let me explain the benefit illustration with below image.

Benefit illustration of LIC Jeevan Shiromani Plan 847

What returns we can expect from LIC Jeevan Shiromani Plan 847?

Let us consider that Mr.X whose age is 30 years opted for Rs.1 Cr LIC Jeevan Shiromani Plan 847 and term of the policy is 20 years, then we can expect the returns as below.

Returns from LIC Jeevan Shiromani Plan 847

You notice that Mr.X will pay the premium up to 16 years only. However, he receives the survival benefit of Rs.45 Lakh on 16th year and 18th year. On maturity, he will receive remaining 10% of Sum Assured+GA+LA.

I considered the LA rate as Rs.200 per Rs.1,000 Sum Assured. Few may argue that this too less by comparing other plans which NOT offers you guaranteed addition. If you check the LA rate of Jeevan Shree (which offers GA like this plan) with the LA rates of other plans, then you notice that LA rate of Jeevan Shree is too less than other plans.

Hence, considering this trend of LIC, I considered the fair value of Rs.200 as LA for calculation. You notice that return on this investment is just around 6%.

Review of LIC Jeevan Shiromani Plan 847

# This plan is not for all. Because the minimum sum assured under this plan is Rs.1 Cr. Hence, if you afford around Rs.5 lakh to Rs.10 Lakh premium then you can opt for this plan.

# The new feature of this plan is eligiblilty for paid up, surrender and loan immediately after one-year completion of the policy period. Usually, LIC plans eligible for paid up and surrender after 3 years. However, LIC reduced this to one year for this plan. In our view, LIC reduced this to one year to make sure that LIQUIDITY must not be an issue.

# This plan offers an inbuilt critical illness cover. However, do remember that getting a claim from critical illness is not so easy and hence you must understand the pros and cons of such critical illness rider benefits. Only 15 illness are covered under this plan.

# If death occurs within 5 years of the policy period, then your nominee will receive SA+GA @ Rs.50 per Rs.1,000 SA. However, if death occurs after 5th year to policy period, then your nominee will receive SA+GA @ Rs.55 per Rs.1,000 SA. Hence, the probability of your nominee receive during the first 5 years is less.

# LIC now started to offer to defer the survival benefit, death benefit and maturity benefits to its plans. However, choosing such options blindly without knowing the interest rate offered by LIC is like a BIGEST mistake. Because, if death occurs, then-nominee has no rights to change these options. The nominee has to continue with the option which policyholder selected. Hence, be careful while exercising this option.

# Coming to returns part, you noticed from above illustration that this policy will give you around 5% to 6% returns. Hence, in no way it is even beat the current inflation rate. Hence, it is waste if you invest for such a long period but get a return which around 5% to 6% tax-free return which is quite good when bank offers same return with taxation.

Conclusion:-This is the best plan forHNIs (setting minimum sum assured as Rs.1 Cr), deferring your survival, death and maturity benefits, inbuilt critical illness rider and eligibility for paid up and surrender within a year.

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