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LIC Jeevan Shanti Plan

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LIC Jeevan Shanti Plan Review

LIC Jeevan Shanti is a Single Premium Annuity Plan. This plan can be used to secure fixed payouts at regular intervals for the rest of your life.

How it works: You pay a Single Premium (also called the 'Purchase Price') to purchase an Annuity. LIC will then pay you regular amounts for the rest of your life. You could receive this regular payouts monthly, quarterly, half-yearly or annually. This regular payout amount is called an Annuity. You have 2 options in this plan - Immediate Annuity & Deferred Annuity. Collectively there are 12 options to receive you regular annuity payments. We will understand them better with the help of examples.
 

Our expert  Deepak Yohannan's thoughts on LIC Jeevan Shanti Plan


 
Plan Name LIC Jeevan Shanti
Launch Date 12th September, 2018
Plan Details Table No. 850
Policy Type Annuity
UIN 512N328V01


Our view on Annuities: Annuities help you fix up a regular flow of income for the rest of your life. You can invest today and ensure that you will get the same income all throughout your life, no matter what. If interest rates (of let us say Fixed Deposits) drop in future, you stand to gain as your annuity rates are locked. But if interest rates (of let us say Fixed Deposits) increase in future, you will feel you are locked-in to plan with low returns. So it is best to use this as one part of your retirement solution and not put all your savings into it.

Also, in case you have a pension plan from LIC, you can only withdraw ⅓ of it when it matures. You will have to buy an Annuity from LIC with the other ⅔ amount. So it is best to know the different options which you have.

Check details of the other Immediate Annuity Plan from LIC - LIC Jeevan Akshay 6.
 

Annuity Options in LIC Jeevan Shanti Policy

You first have to opt for any of the following 2 options:

Immediate Annuity - In this option, your payments will start immediately. You purchase the plan by making a single payment and depending on the payout chosen, the payouts will start. In case you have chosen monthly payouts, your annuity payouts will start after the first month. In case you choose annual payouts, you will start receiving your first annuity after a year. The immediate annuity options are as follows:
  • Option A: Immediate Annuity for life.
  • Option B: Immediate Annuity with guaranteed period of 5 years and life thereafter.
  • Option C: Immediate Annuity with guaranteed period of 10 years and life thereafter.
  • Option D: Immediate Annuity with guaranteed period of 15 years and life thereafter.
  • Option E: Immediate Annuity with guaranteed period of 20 years and life thereafter.
  • Option F: Immediate Annuity for life with Return of Purchase Price.
  • Option G: Immediate Annuity for life increasing at a simple rate of 3% p.a.
  • Option H: Joint Life Immediate Annuity for life with a provision for 50% of the annuity to the Secondary Annuitant on death of the Primary Annuitant.
  • Option I: Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives.
  • Option J: Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives and return of Purchase Price on death of last survivor.
Deferred Annuity - In this option, you purchase the plan by making a single payment and choose to start receiving the payouts only after a certain number of years. This option is useful for those who have some extra money when young and want to lock-in some retirement income when they turn older. For the period of deferment, you will receive guaranteed additions which are again fixed when you buy the plan. The options for Annuity under this are as follows:
  • Option 1: Deferred annuity for Single life
  • Option 2: Deferred annuity for Joint life
We will understand both the above scenarios with examples.


COMPARE THIS PLAN WITH OTHER PENSION PLANS


 

Eligibility conditions in LIC Jeevan Shanti Plan

For Immediate Annuity Option
 
  Minimum Maximum
Purchase Price Rs. 1,50,000 No Limit
Entry Age
(completed age)
30 years 85 years
100 years (Option F)

The Joint Life Options (H, I & J) can be taken by grandparents, parent, children, grandchildren, spouse or siblings.


For Deferred Annuity Option
 
  Minimum Maximum
Purchase Price Rs. 1,50,000 No Limit
Entry Age
(completed age)
30 years 79 years
Deferment Period 1 year 20 years
Subject to max vesting age
Vesting Age
(completed age)
31 years 80 years


Minimum Annuity Amounts

No matter which option you select and what your purchase price is, these minimum annuity criteria should be met.
 
Monthly Quarterly Half-yearly Annual
Rs. 1,000 Rs. 3,000 Rs. 6,000 Rs. 12,000
 

Other Benefits in LIC Jeevan Shanti Plan

Loan Availability: Loan facility shall be available after completion of 1 policy year. You will have to check with LIC for the applicable interest rate when you apply for the loan.

Surrender the plan: The policy can be surrendered at anytime after three months from the completion of policy when Annuity Option is with Return of Purchase Price - Option F only.

Free look Period: If the Policyholder is not satisfied with the “Terms and Conditions” of the policy, the policy may be returned to the Corporation within 15 days of receiving the policy documents
.
Handicapped dependent - You can take the plan for the benefit of handicapped dependent (Divyangjan Life).
 

Understanding LIC Jeevan Shanti Plan with Examples

First let us look at the Immediate Annuity Options. We have 9 options which the customer can take - Option A to Option J.

Suppose we have the following criteria:

Purchase Price - 10 lakhs
Age at time of purchase - 45 years completed
Annuity Mode - Annual

Option A - Immediate Annuity for life - The pension/annuity is paid regularly till the policyholder is alive. The amount paid does not change at all. After the death of the policyholder, the 10 lakhs is not paid back.
Example -  The policyholder will get an annual pension of Rs. 74,300 every year till he is alive.

Option B - Immediate Annuity with guaranteed period of 5 years and life thereafter - The pension/annuity will be paid for 5 years, irrespective of whether the policyholder survives for 5 years. In case the policyholder survives for 5 years, the same amount will be paid for the rest of his life. After the death of the policyholder, the 10 lakhs is not paid back.
Example -  The policyholder or the nominee will get an annual pension of Rs. 74,200 for 5 years for sure. In case policyholder stays alive for more than 5 years, the same Rs. 74,200 will be paid every year till he is alive.

Option C - Immediate Annuity with guaranteed period of 10 years and life thereafter - The pension/annuity will be paid for 10 years, irrespective of whether the policyholder survives for 5 years. In case the policyholder survives for 10 years, the same amount will be paid for the rest of his life. After the death of the policyholder, the 10 lakhs is not paid back.
Example -  The policyholder or the nominee will get an annual pension of Rs. 73,900 for 10 years for sure. In case policyholder stays alive for more than 10 years, the same Rs. 73,900 will be paid every year till he is alive.

Option D - Immediate Annuity with guaranteed period of 15 years and life thereafter - The pension/annuity will be paid for 15 years, irrespective of whether the policyholder survives for 15 years. In case the policyholder survives for 15 years, the same amount will be paid for the rest of his life. After the death of the policyholder, the 10 lakhs is not paid back.
Example -  The policyholder or the nominee will get an annual pension of Rs. 73,500 for 15 years for sure. In case policyholder stays alive for more than 15 years, the same Rs. 73,500 will be paid every year till he is alive.

Option E - Immediate Annuity with guaranteed period of 20 years and life thereafter - The pension/annuity will be paid for 20 years, irrespective of whether the policyholder survives for 20 years. In case the policyholder survives for 20 years, the same amount will be paid for the rest of his life. After the death of the policyholder, the 10 lakhs is not paid back.
Example -  The policyholder or the nominee will get an annual pension of Rs. 72,900 for 20 years for sure. In case policyholder stays alive for more than 20 years, the same Rs. 72,900 will be paid every year till he is alive.

Option F - Immediate Annuity for life with Return of Purchase Price. The pension/annuity is paid every year as long as the policyholder is alive. On death of the policyholder, the purchase price is returned to the nominee.
Example -  The policyholder will get an annual pension/annuity of Rs. 65,400 every year as long as he is alive. On death of the policyholder, the Rs. 10 lakhs invested by him is returned to the nominee.

Option G - Immediate Annuity for life increasing at a simple rate of 3% p.a. - The pension/annuity is paid every year as long as the policyholder is alive. The pension amount increases by 3% of the first year’s annuity amount every year. After the death of the policyholder, the 10 lakhs is not paid back.
Example -  The policyholder will get an annual pension/annuity every year as long as he is alive. In the first year, he gets Rs. 56,200. This amount will increase by Rs. 1,686 (3% of Rs. 56,200) every year. So in the 2nd year, he gets Rs. 57,886 and in the 3rd year he gets Rs. 59,572 and so on.

Option H - Joint Life Immediate Annuity for life with a provision for 50% of the annuity to the Secondary Annuitant on death of the Primary Annuitant - In this option, you can have 2 policy members, a primary member and a secondary member. Age of secondary member is 35 years at the time of taking this policy. The primary member will receive pension as long as he is alive. After his death, the secondary member will get 50% of the pension amount for the rest of his life. After the death of the second member, the 10 lakhs is not paid back. 
Example -  The primary member will get Rs. 71,100 every year as long as he is alive. On death of the primary member, the secondary member will get Rs. 35,550 (50% of Rs. 71,100) every year as long as he or she is alive.

Option I - Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives - In this option, you can have 2 policy members.  Age of second member is 35 years at the time of taking this policy. Pension is paid out as long as any of the members are alive. On death of both the members, the Rs. 10 lakhs is not paid back. 
Example -  Rs. 68,300 is paid every year as long as long as any of the members are alive.

Option J - Joint Life Immediate Annuity for life with a provision for 100% of the annuity payable as long as one of the Annuitant survives and return of Purchase Price on death of last survivor - In this option, you can have 2 policy members. Age of second member is 35 years at the time of taking this policy. Pension is paid out as long as any of the members are alive. On death of both the members, the Rs. 10 lakhs is paid to the nominee.
Example -  Rs. 64,900 is paid every year as long as long as any of the members are alive. On death of both the members, Rs. 10 lakhs is returned to the nominee.


Now, let us look at the options which are available in case you go in for Deferred Annuity. You have 2 options under this scenario.

Suppose we have the following criteria:

Purchase Price - 10 lakhs
Age at time of purchase - 45 years completed
Annuity Mode - Annual
Deferment Period - 20 years

This means that the policyholder pays Rs. 10 lakhs today but chooses to start receiving the regular pension/annuity payments after 20 years. This can be used by those who have some money to invest today but want to receive the benefits only when their retirement period starts. There are 2 options to choose:
  • Option 1: Deferred annuity for Single life
  • Option 2: Deferred annuity for Joint life
 
In case of death of the policyholder, the Death Benefit is payable as mentioned below. Higher of:
  • 110% of the Purchase Price
  • Purchase Price plus Guaranteed Additions minus Annuity Payments made till date

Guaranteed Additions - These are added to your policy on a monthly basis during the deferment period of 20 years. This is calculated as follows: Purchase Price x Annual Annuity Rate / 12 

Let us understand these 2 options better with the help of examples.

Option 1 - Deferred annuity for Single life - You make the Rs. 10 lakhs payment but decide to receive the regular payouts after 20 years. In case of death of the policyholder during the deferment period, the death benefit is paid to the nominee. Once the deferment period is over (20 years), the regular pension/annuity payments are made as long as the policyholder is alive. On death of the policyholder, the death benefit is paid to the nominee.
Example - After 20 years, the policyholder is paid Rs. 2,06,600 every year till he is alive. In case of death of the policyholder before the deferment period, the death benefit is paid out. Also, after the death of the policyholder after the payments start, the death benefit is paid to the nominee. Please note that the value of the death benefit will change every year.

Option 2 - Deferred annuity for Joint life - This is a joint life option. You can have a primary member and a secondary member. You make the Rs. 10 lakhs payment but decide to receive the regular payouts after 20 years. In case of death of both the members during the deferment period, the death benefit is paid to the nominee. Once the deferment period is over (20 years), the regular pension/annuity payments are made as long as any one member is alive. On death of both the members, the death benefit is paid to the nominee.
Example - After 20 years, the policyholder is paid Rs. 2,27,200 every year till he is alive. In case of death of the any of the members, the same amount will be continued for the second member. Also, after the death of both the members after the payments start, the death benefit is paid to the nominee. Please note that the value of the death benefit will change every year.
 

Options for taking lumpsum payments wherever applicable

In case of Return of Purchase Price or Death Benefit payments, the following options are available:
  • Lumpsum Death Benefit - the entire amount can be taken in lumpsum at one go
  • Purchase an Annuity - The nominee can choose to purchase an Annuity with the same amount which is being received in bulk.
  • In installments - The nominee will get the payments in monthly/quarterly/half-yearly/annual payments over 5, 10 or 15 years. The applicable interest rate would depend on the rate declared that year by LIC.

Note: If the policyholder has decided a mode of payment for receiving the lumpsum amount, it cannot be changed by the nominees. So be careful while deciding this.

That pretty much captures the major understanding of LIC Jeevan Shanti. In case you have any queries, please drop a comment and we will surely share our inputs.

 
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