Did you know that 40% of Indians don’t have a sufficient emergency fund, and 74% lack adequate life insurance? A Finnovate survey reveals these concerning statistics.
This leaves many vulnerable to financial shocks from unexpected events. That’s why considering a life insurance policy makes sense. India’s LIC offers several plans that guarantee lifelong pensions, including the New Jeevan Shanti Policy, which provides a regular pension for life with a single investment.
What is the LIC Jeevan Shanti Plan?
LIC’s Jeevan Shanti is an annuity plan that offers deferred annuity options, available through a one-time lump sum payment. The plan ensures annuity payments throughout the annuitant’s lifetime and is available to individuals aged 30 to 79.
There are two annuity options:
1. Deferred annuity for single life
2. Deferred annuity for joint life
In simpler terms, you invest once and receive a regular pension for the rest of your life.
Note: A deferred annuity is a contract between an individual and an insurance company that guarantees income upon maturation, often until the annuitant dies.
How does the Jeevan Shanti Plan work?
Let’s look at an example to make it clearer:
Rajiv, aged 32, opts for a deferment period of 28 years with an annuity rate of 10% per annum.
Annual Pension: 10% of Rs 2,00,000 = Rs 20,000 per annum
Monthly Pension: Rs 20,000 / 12 = Rs 1,667 per month
At age 60, Rajiv would receive approximately Rs 20,000 annually or Rs 1,667 monthly.
If Rajiv invested Rs 5 lakh:
Annual Pension: 10% of Rs 5,00,000 = Rs 50,000 per annum
Monthly Pension: Rs 50,000 / 12 = Rs 4,167 per month
So, at age 60, he’d get around Rs 50,000 annually or Rs 4,167 monthly.
What should you consider when buying a Life Insurance Policy?
“When investing in annuity plans, it’s crucial to consider several factors to ensure it aligns with your financial goals,” advises Adhil Shetty, CEO of Bank Bazaar. He suggests evaluating the annuity options, understanding guaranteed returns, considering inflation’s impact, and knowing the tax implications to optimise post-retirement income.
Key features of LIC New Jeevan Shanti
Flexible Death Benefit Payout: You can choose a lump sum or instalments over 5, 10, or 15 years.
Support for Dependants: The policy can benefit a disabled dependant, providing a secure income source if the policyholder passes away.
Incentives for Higher Investments: Higher purchase prices (above Rs.5 lakh) earn extra annuity rates.
No Maturity Benefit: The plan doesn’t offer any maturity benefit.
What are the eligibility criteria?
To enjoy these benefits, certain conditions must be met:
Entry Age: 30 to 79 years
Vesting Age: 31 to 80 years
Deferment Period: 1 to 12 years, depending on the vesting age
Purchase Price: Minimum Rs.1,50,000, no upper limit
Annuity: Monthly, quarterly, half-yearly, or yearly, depending on the purchase price
Can you use the plan for a dependent person?
Yes, if you have a dependant with a disability, you can opt for the Deferred Annuity for Single Life option with them as the nominee. If the purchase price is less than Rs 1,50,000 and the policyholder dies, the death benefit will fund an immediate annuity for the dependent.
Is there an incentive for a high purchase price?
Yes, there are rewards for higher purchase prices in three categories:
Rs 5,00,000 to Rs 9,99,999
Rs 10,00,000 to Rs 24,99,999
Rs 25,00,000 and above
The reward increases with a higher purchase price and a longer deferment period.
How can you calculate your pension?
The LIC Jeevan Shanti Pension Plan Calculator is a free online tool that helps you estimate your monthly income based on your investment. It considers your age, retirement age, purchase price, and deferment period to give you accurate information. Keep the eligibility criteria in mind to get precise estimates.
Additional policy details
Surrender Value: You can surrender the policy at any time and receive the higher of the Guaranteed Surrender Value (GSV) or the Special Surrender Value.
Loan Facility: A loan against the policy is available after three months, up to 80% of the surrender value.
Free Look Period: You have 15 to 30 days to review the policy and raise any objections.
Exclusions: Death due to suicide within the first 12 months of the policy results in the nominee receiving 80% of the premium or surrender value, whichever is higher.
