LIC New Jeevan Nidhi

Recommendation

Do not invest in New Jeevan Nidhi

Review of New Jeevan Nidhi

New Jeevan Nidhi is a traditional pension plan and is very much like LIC’s existing Jeevan Nidhi plan. You pay premiums till the vesting period and on that date your sum assured along with guaranteed addition and bonuses earned (if any) are available for you to purchase an annuity product.

Guaranteed addition is a flat Rs 50 per Rs 1000 sum assured for the first five years. In the following years you earn bonuses depending on the company’s performance.

You can find scheme details at http://customer.onlinelic.in/New_Jeevan_Nidhi_plan_features.htm

Being a traditional plan New Jeevan Nidhi is not suitable for your post-retirement pension need. Retirement planning is a long term affair (we mean 5 years or more). Long term investment always ought to have exposure to market-linked securities and New Jeevan Nidhi restricts itself to fixed income products.

All it takes to understand why New Jeevan Nidhi is a bad product for you is a little bit of basic calculation. Take a look at LIC’s illustration itself at http://customer.onlinelic.in/pages/benefit_illustration_for_sales_brochure-_New_jeevan_nidhi-page-001.jpg

Put in another way the scenario looks like this 
Age: 35 years 
Term: 25 years 
Total premium: Rs 1,03,025 
Insurance cover: Rs 1,00,000 
Vesting benefit: Rs 1,25,000 (approximately 2% yield) 
Best case vesting benefit: Rs 2,33,500 (approximately 6% yield)

At a time when bank savings deposits pay 4% pa there is no reason for you to buy New Jeevan Nidhi. You’d rather put all the money in a fixed deposit and earn a decent 8.5% for 10 years. 
Coming to the insurance part, it is awfully less. While New Jeevan Nidhi gives an approximate life cover of 20 times the premium. To give an idea, term life insurance policies would give 500 times the cover for the same premium!  
To summarize you can get appropriate cover for your age and income from a term insurance and as for your investment or pension need you have variety of options to choose from- PPF, mutual funds, ETF, real estate to name a few. When you reach retirement age you can buy an annuity product or create your own customized systematic withdrawal plan!

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