Jeevan Saral

T.S.Rajan,Development Officer

The Magic of Jeevan Saral

An insight into this unique plan of L.I.C.

Golden Peacock Award winner in 2004


Popular L.I.C. Plans

• Endowment (with & without profits)

• Money back plans

• Whole Life Plans (with & without profits)

• Pension Plans (Immediate & Deferred Annuity)

• Joint Life Plan

• Term Assurance Plans…..


Variants & Hybrids

• Jeevan Mitra - double/triple cover end.plan

• Jeevan Surabhi - variant of Moneyback

• Jeevan Anand - Hybrid of End. & W.Life

• Jeevan Rekha - Hybrid of W.Life & M-back

• Jeevan Shree - Variant of Lim.Pay.End.


Typical Pattern of these plans

• Premium Rates are defined per 1000 sum assured

• One has to decide on sum and term / Premium term. Accordingly the premium for his age is calculated.

• The contract is for a predetermined period with survival benefits (if any) defined on specified dates. (e.g. 75/20, 14/25, etc.)


Typical Pattern of these plans(cont.)

• In most typical plans, reversionary bonuses / G.A. and FAB/LA are added to the policy and provided alongwith sum assured on maturity.

• Surrendering early means losing money. But then that is the only way to liquidate cash. Otherwise raise loan against your policy.


Unit Linked Policies

• New trend in insurance selling

• Premium is used for providing risk cover and investment in mutual fund units.

• Growth comes through appreciation of NAVs. Hence quite dynamic in nature

• If markets are down NAVs can also have negative growth. Hence risk of losing money too.


Unit Linked Policies (cont.)

• To effectively grow the money, policyholder must closely watch the trends of the market and keep switching between funds

• Not many people have the expertise or the inclination to monitor their investments at frequent intervals.


Jeevan Saral - a plan with a difference

Jeevan Saral is a unique plan which offers the best features of a

conventional plan and a unit linked plan in one product itself


How is it different?

• Instead of starting with Sum Assured you start by deciding how much premium you want to invest

• Riskcover is same for all ages for a specific modal premium. i.e. For Rs.5000 p.a. the riskcovered for age 20 as well as age 45 is the same


Eligibility Conditions

All age proofs acceptable

Males & Females of all categories are eligible

Rs.400/- per monthMinimum premium for entry age 50 years or above

NMS/NMG allowedAll modes of payment except Single Premium & Monthly mode.

Rs.250/- per monthMinimum premium for entry age 49 years or below

10 years35 years

Minimum termMaximum term

70 years Maximum age at maturity

12 years (completed) 60 years

Minimum age at entryMaximum age at entry


Salient Features of Jeevan Saral

• A lot of guarantee

• A smooth return over the term

• Flexibility of term

• A lot of liquidity

• A higher cover, particularly for lower terms and higher entry ages

• Group premium



• Client has to decide – premium to be paid, and– Mode only

• He/she can choose any term

• No surrender penalty after 5 years

• With profits – loyalty additions after 10 or more years



• Death Benefit– 250 times the monthly premium, plus – return of premiums excluding extra/rider

premium and first year premium, plus– the Loyalty Additions, if any.

• Maturity Benefit– Maturity Sum Assured, plus– the Loyalty Additions, if any.


Unique Feature

In case of death claim, in addition to the

Sum Assured payable on death, All

Premiums Paid, (excluding the first year

premium, extra premiums and premiums for

rider benefits), will be refunded. This is the

first time that such a feature has been

introduced. The result is a continuously

increasing Risk Cover from the second

year onwards.


Is Jeevan Saral a With Profit Plan ?

• YES. But bonus will not be declared each year as under other plans.

• “Loyalty Addition” will be given after atleast 10 years of premium payments and duration.

• This Loyalty Addition is payable even when a policy is Surrendered or results into a death claim after 10 years.


What is loyalty What is loyalty addition?addition? How much will How much will it be?it be?


Loyalty AdditionLoyalty Addition

With profitWith profit• Identical to Identical to bonusbonus• 165, 174, 165, 174, 179179

Without Without profitprofit• Meager Meager amount amount • 111, 150111, 150


Another Mega Benefit

• There is a misconception that Loyalty addition is just a little sweetener and the main growth comes from bonus / G.A.

• But it will not be so in the case of Jeevan Saral. Actuarial analysis will show that the actual L.A. that can be paid will not be less than the total regular bonus payable on death claim, surrender or maturity.

• In fact the policy holder will stand to gain more due to this concept


Another Mega Benefit (cont.)

• Reversionary bonus is declared after assessment of surplus.

• On this surplus first a tax of 12.5% + 10% surcharge on tax and 3% educational cess, i.e. a total of 14.1% has to be paid.

• Thereafter 5% is the government share

• Then there is also a Solvency Margin provision to be made

• The remainder is then distributed as bonus to the policy holders


Another Mega Benefit (cont.)

• Loyalty Additions and Final Addition Bonuses are not based on assessment of surplus.

• Hence there is NO TAX, NO GOVERNMENT SHARE AND NO SOLVENCY MARGIN PROVISION to be made.

• The result naturally is substantially higher benefit to the policy holder


Paid-up and Surrenders

• Available after 3 years

• No Surrender penalty after 5 years.

• For e.g. if a 20 year is being surrendered after 12 years, it will be treated as if the policy was originally taken for a term of 12 years, and the maturity value corresponding to term 12 will be paid.

• In this sense, Jeevan Saral can be called a Flexible Term plan.


SURRENDER VALUE

PERIOD MATURITY S.A.

• 3 TO 4 YEARS 80%

• 4 TO 5 YEARS 90%

• AFTER 5 YEARS 100%


WHAT IS B.M.S.A.?

• Basic Maturity Sum Assured is the amount that the customer will get on the date of maturity for a contribution of Rs.100/- per month.

• Once B.M.S.A. is known, we can calculate the Maturity S.A. for any premium

• After arriving at M.S.A., Loyalty Additions are to be added in the same manner as Reversionary Bonus


Another Unique Feature

• Yes. Jeevan Saral boasts of another fantastic unique feature - Partial Surrender

• If you need money, you can partially surrender the policy

• The premium will correspondingly reduce and thereby the associated benefits too.

• This means that you can virtually break one policy into multiple policies

• This also means that you can use this policy as a flexible Money back Plan.


Standard Terms of this Plan

• For a chosen premium, the level of benefits payable at maturity (The Maturity Sum Assured) will be quoted excluding L.A.

• The Maturity Sum Assured has got the same Guarantee like Sum Assured under other policies of Govt. of India as per section 37 of the L.I.C. Act, 1956


Rider Benefits

• Accident benefit (optional)• Term Assurance Rider (optional)• Standard Term Assurance and AB rider Sums

Assured limits apply• The Term Assurance and AB rider Sums

Assured will not exceed the Death Beneift Sum Assured


Conditions for Partial Surrender

• Atleast 3 years premiums are paid

• Minimum basic annual premium after withdrawal - 3000/- where age at entry was 49 years or below and 4800/- where age at entry was 50 years or above

• Minimum basic annual premium for withdrawal - 1200/-

• Withdrawal in multiples of - 600/- annual premium

• Minimum waiting period between successive withdrawals - 1year

• No loan should be o/s on the policy at the time of withdrawal

• All future benefits and premiums under the policy will get reduced proportionately


SARAL VS OTHER PLANS

• YARDSTICKS TO ANALYSE A PLAN?

. RISK COVER

. MATURITY VALUE

. PREMATURE WITHDRAWAL

SARAL Vs TABLE 14Age 30

14-17 Monthly : 1000

Age 30

165-17 Monthly 10001. MATURITY : SA+BONUS

200000+153000 = 353000

2. RISK COVER : (Ex 5 yrs)SA+BONUS

200000+45000 = 245000

3. SURRENDER :Surrender of a conventional

policy will result into a loss at any point of time

1. MATURITY : MSA+LA224750+190400 = 415150

2. RISK COVER : (Ex 5 yrs)DSA + RET. OF PREMIUM

250000+48000 = 298000

3. SURRENDER :Surrender after 5 years is

treated as MATURITY !T.S.Rajan,Development Officer


Agent’s Commission

40% of FY commission

Bonus Commission

5%7.5%20%10 to 14 years

5%7.5%25%15 years & above

Thereafter2nd & 3rd Year

First Year Policy Term


Business

Jeevan Saral