LIC’s New Jeevan Nidhi Plan is a traditional, participating Pension Plan. Please note that Pension Plans are also referred to as Deferred Annuity Plans - it is named It offers a combination of protection and savings which can be used for your retirement days.
How does LIC New Jeevan Nidhi Policy work?
When buying the LIC New Jeevan Nidhi plan, the customer has to decide on the following:
Sum Assured (this is the amount of cover that you want)
Policy Term (this is the period for which you wish to have the cover)
Based on the above 2 factors and the age at which you are taking the policy, your annual premium will be decided, You have to pay these premiums throughout the policy term.
Since it is a Participating plan, you will be eligible for the following at various points through the policy term. These are not guaranteed and you will only know the values as and when they are declared by LIC.
Guaranteed Additions @ Rs. 50 per 1000 Sum Assured for the 1st 5 years
Simple Reversionary Bonus
Final Addition Bonus
Key features of the LIC New Jeevan Nidhi Plan
Guaranteed Additions are added to the plan during the first five years of the policy.
Simple reversionary bonuses are added from the 6th year.
Premiums are required to be paid for the entire plan tenure or once at plan commencement.
The plan provides Accidental Death and Disability Benefit Rider under which an additional Sum Assured is paid if the insured dies due to an accident.
Rebates in premiums are allowed for choosing a high level of Sum Assured and also for paying premiums annually or semi-annually.
COMPARE THIS PLAN WITH OTHER PENSION PLANS
Death Benefit in LIC New Jeevan Nidhi
If policyholder dies during the first 5 policy years - Sum Assured + Guaranteed Additions are paid to the nominee.
If policyholder dies after the first 5 policy years - Sum Assured + Guaranteed Additions + Bonuses declared are paid to the nominee.
Maturity Benefit in LIC New Jeevan Nidhi
In case the policyholder survives the policy term, the Sum Assured + Guaranteed Additions + Bonuses which have accrued will be available to him. Now this Maturity Amount HAS to be used to be used in one of the following ways:
Purchase an Annuity Plan for the entire Maturity Amount from LIC and get regular income from the Annuity plan for the rest of their lives. You can check out the Annuity Plan from LIC which is available now - LIC Jeevan Akshay.
Withdraw a maximum of ⅓ of the Maturity Amount and invest the balance in the Annuity Plan from LIC to get a regular income.
Invest in buying another Single Premium Pension plan from LIC
Let us understand LIC New Jeevan Nidhi Plan better with the help of an example.
We have Arvind Saxena, age 35 who wishes to buy this plan. He goes in for the plan with the following: Sum Assured - Rs. 1,00,000 Term - 25 years (this is also called the deferment period)
Just for the sake of understanding, his Vesting Age would be 60 years.
For a 1 lakh cover for 25 years, his annual premium will be Rs. 4,121
Scenario 1 : If Arvind dies after 3 policy years - The nominee would get the Sum Assured + Guaranteed Additions. Sum Assured = Rs. 1,00,000 Guaranteed Additions = Rs. 50 per 1,000 Sum Assured for 3 years i.e. (Rs. 50 x 100 x 3) = Rs. 15,000
So nominee will get Rs. 1,00,000 + Rs. 15,000 = Rs. 1,15,000
His nominee has the option to take this money as a lumpsum amount or purchase an annuity with the full or partial amount.
Scenario 2 : If Arvind dies after 15 policy years - The nominee would get the Sum Assured + Guaranteed Additions + Reversionary Bonus + Final Addition Bonus Sum Assured = Rs. 1,00,000 Guaranteed Additions = Rs. 50 per 1,000 Sum Assured for the 1st 5 years i.e. (Rs. 50 x 100 x 5) = Rs. 25,000 Reversionary Bonus - This will depend on the rates announced by LIC at the end of the year. Since we don’t know what rates will be declared, we will assume the rate of Rs. 44 per 1,000 Sum Assured for every year after the 1st 5 years. So for 10 years, the Simple Reversionary Bonus can be assumed to be Rs. 44 x 100 x 10 = Rs. 44,000 Final Addition Bonus - This is a one time payment which will also depend on the rate announced by LIC. So again, let us assume a rate of Rs. 200 per 1,000 Sum Assured. So the Final Addition Bonus will be Rs. 200 x 100 = Rs. 20,000
So his nominee will get Rs. 1,00,000 + Rs. 25,000 + Rs. 44,000 + Rs, 20,000 = Rs. 1,89,000 Maturity Benefit (this is also called as the Vesting Benefits)
Scenario 3 : If Arvind survives till the end of the policy term of 25 years - Arvind will get the Sum Assured + Guaranteed Additions + Reversionary Bonus + Final Addition Bonus Sum Assured = Rs. 1,00,000 Guaranteed Additions = Rs. 50 per 1,000 Sum Assured for the 1st 5 years i.e. (Rs. 50 x 100 x 5) = Rs. 25,000
Reversionary Bonus - This will depend on the rates announced by LIC at the end of the year. Since we don’t know what rates will be declared, we will assume the rate of Rs. 44 per 1,000 Sum Assured for every year after the 1st 5 years. So for 10 years, the Simple Reversionary Bonus can be assumed to be Rs. 44 x 100 x 25 = Rs. 1,10,000
Final Addition Bonus - This is a one time payment which will also depend on the rate announced by LIC. So again, let us assume a rate of Rs. 200 per 1,000 Sum Assured. So the Final Addition Bonus will be Rs. 200 x 100 = Rs. 20,000
So Arvind will get Rs. 1,00,000 + Rs. 25,000 + Rs. 1,10,000 + Rs, 20,000 = Rs. 2,55,000
Important - This amount can be used by Arvind in 3 ways:
Use the entire Rs. 2,55,000 to buy an Annuity Plan
Withdraw Rs. 85,000 (⅓ of Rs. 2,55,00) for any purpose and use the balance Rs. 1,70,000 for buy an Annuity
Use the entire Rs. 2,55,000 to buy a Pension Plan like this one but only in the Single Premium Mode
So it is important to note that you cannot withdraw the entire amount.
Sample Premium Illustration of LIC New Jeevan Nidhi Plan
Here are the sample tabular premium rates (inclusive of taxes) payable by a healthy, non-tobacco user male for different combinations of age, Sum Assured and policy term.
Eligibility Criteria for buying LIC New Jeevan Nidhi Plan
Annually, half-yearly, quarterly, monthly or Single Premium
Note: The plan can be bought only by resident Indians and NRIs cannot avail the plan. Other eligibility criteria include the following:
Tax Implication in LIC New Jeevan Nidhi Plan
Premiums – The premiums paid for the plan are exempt from taxation under Section 80CCC of the Income Tax Act. The maximum exemption that can be availed is Rs.1.5 lakhs. To claim this exemption, the premium should be restricted to 10% of the Sum Assured selected.
Maturity Claim – 1/3rd of the vesting benefit commuted is tax-free under Section 10(10A). Annuity, received from the remaining corpus is taxable.
Death Claim – Death claims received under the plan are free from taxation under Section 10(10D) if availed in lump sum. There is no maximum limit on exemptions of death claims. If availed as annuity, the annuity received is chargeable.
Surrendering, making the policy paid-up or cancelling the LIC New Jeevan Nidhi Plan
Paid-up Value – If the policyholder has paid the first three years’ premiums and future premiums have been not paid, the policy becomes a paid-up policy. Any rider attached to the plan lapses if the policy becomes paid-up. Guaranteed Additions and bonuses do not accrue further under the plan. The benefits under the plan are reduced and are calculated as follows:
Paid-up Sum Assured = Basic Sum Assured * (number of premiums paid / total number of premiums payable) + vested Guaranteed Additions and bonuses. On maturity, the Paid-up Sum Assured would be payable as annuity as per vesting benefit. On death, the nominee can take the benefit partly or wholly in lump sum or annuity.
Surrender Value - If the policyholder wants, he can surrender his policy and avail the Surrender Value. The policy acquires a Surrender Value only if the first three years’ premiums have been paid. Higher of the Guaranteed Surrender Value (GSV) or the Special Surrender Value (SSV) is paid on surrendering the plan. GSV and SSV are calculated as follows:
GSV for Regular Premium plans = (total premiums paid including bonus and Guaranteed Additions* GSV Factor)
GSV for Single Premium Plans = 90% of the Single Premium paid + vested Guaranteed Additions and bonus
SSV is declared by the company based on its performance and is calculated as follows:
SSV Factor * total premiums paid including bonus and Guaranteed Additions
The Surrender Value can be used to buy an immediate annuity after commuting 1/3rd of the corpus from the company. Alternatively, a Single Premium deferred Annuity can also be purchased with the surrender value.
Free-look Period – If the policyholder is not happy with the plan, he can cancel the policy within 15 days of the plan issuance. This period is called the free-look period. Upon cancellation, the premium paid net of any applicable expenses would be returned.
If you have any questions on the LIC New Jeevan Nidhi Policy, drop in a line in the comments and we will be happy to help out.