Many insurance policyholders dislike the idea of sunk premiums paid towards risk covers. The thought of paying regular premiums only to get nothing if you survive the term of the policy doesn’t seem appealing to them. Such policyholders seek something in return for the payments they made over the years.
Plain-vanilla term covers are ideal and are suitable for almost all types of policyholders. So, is a policy that returns your premiums required? Here’s more on LIC Jeevan Kiran.
LIC Jeevan Kiran is a term insurance product. It is a non-linked and a non-saving policy. The cover pays out a lump sum to the nominee in case of the unfortunate death of the insured person. But the difference is that in case the insured person survives the policy term, premiums are returned. The policy term can extend from 10 years to 40 years. The minimum age at entry is 18 years, while the maximum age is 65 years. Also, the maximum age at maturity is 80 years.
The minimum basic sum assured that can be opted for is ₹15 lakh.
You can pay premiums via two modes. One is the regular premiums over the course of the policy period at a monthly, quarterly, half-yearly or annual frequency. The second option is a single premium.
These premiums that are paid would be returned to you, of course, without the GST tax component.
In the case of death when regular premium mode is opted for, the nominee would get the highest of seven times annualised premium; or 105 per cent of total premiums paid until the date of death; or the basic Sum Assured.
If the single premium payment is opted for, the nominee would receive the highest of 125 per cent of single premium; or basic sum assured.
The premiums charged
Given that LIC Jeevan Kiran is a term policy that seeks to return your money upon survival at maturity, the premiums are higher than for regular term covers.
Now, there are two categories of premium rates applicable: 1. For smokers and 2. Non-smokers. If the urinary cotinine test is not taken, then the premium rates for smokers would be applicable, even if you are a non-smoker.
According to the brochure, the annual premium for a 20-year policy with sum assured of ₹20 lakh taken by a 40-year-old non-smoker is ₹21,820 (exclusive of taxes). In case the same policyholder opts for a single premium policy, the premium would be ₹1,39,680.
The annual rate is quite expensive when you compare it to the term insurance policies that do not return the premiums.
For example, data from Policybazaar shows that for a ₹25-lakh sum assured for a person with the same demographics as above – 40-year-old non-smoker taking a 20-year policy – the annual premiums range from as low as ₹5,010 to ₹7,226. These are offered by the likes of Canara HSBC Life Insurance (young term plan-life secure), Max Life (smart secure plus), HDFC Life (click 2 protect super) and Aegon Life (iTerm Prime).
Thus, for a slightly higher cover, the rates for policies that do not return your premiums are nearly a third to a fourth of the rates compared to ones that do, such as LIC Jeevan Kiran.
Further, even for a ₹1-crore term cover, the premiums are just ₹10,000 to ₹13,000 (offered by private insurers) for a person of the demographics mentioned earlier.
What should investors do?
The idea of a term insurance policy is to cover risks – your income and liabilities – over the period of your working life so that your family members do not suffer in case of your sudden absence.
It may not be a great idea to look for returns from plain term covers. And the ones that do return your premiums cost at least two to three times more compared to regular term covers that do not pay anything upon survival of the policy tenure.
Also remember that even when your premiums are returned, the GST that is paid – 18 per cent on the premium for term insurance policies – is not given back to you. Even the additional premiums that you pay for any riders will not be returned.
Taking a plain-vanilla term insurance policy that covers your incomes, investments, expenses and liabilities till your planned retirement would be good enough.