Should I invest in LIC’s Jeevan Labh policy for my long term investment need?
Jeevan Labh returns:
I went through official brochure of LIC to calculate returns on Jeevan Labh. (Will share screenshot). In summary, it says, if we pay 9,134 every year for 16 years, we will get 2,20,000 (guaranteed) or 3,70,000 if we include expected bonus (not guaranteed) after 25 years.
Using purely in these inputs if we calculate the returns, in scenario 1 (guaranteed) return works out to be 2.3% and in scenario 2 (with bonus) return is 5.3%
Now, twist in the tale:
Since my investment gets tax savings under section 80C, if I include this savings also to my calculation, return in first case works out to be 8.5% in first case and 13.9% in second case. Considering section 10d which will help to avoid tax in maturity benefit, it looks lucrative. Many people may look at second part (including tax savings benefit).
For me, even after looking at these calculations and looking it as a pure investment product (excluding risk cover) it still does not impress me as investment product. And here is why:
Any investment product should deliver on its own and not through tax saving benefits. What I mean by that is, this product’s pure return is 5.3%. It should not take help of section 80C to inflate its returns. Because remember, I can use the same section 80C for my VPF (Voluntary Provident Fund) to get the same benefit. Why should I reserve section 80C benefit to Lic’s Jeevan Labh? If I exclude 80C benefit, then I am comparing 8.5% PF return with LIC’s 5 3%. Since both are long term, VPF easily is a preferred choice.
If we are really looking at long term (call it any goal: Children’s education, marriage or retirement), then best returns will be from efficiently built mutual fund portfolio. It comes with risk, I agree. But of us, will be comfortable with that risk for long term (it looks scary when we look short term).
To be fair with Jeevan Labh, it also provides risk cover. But if I seperate this part and buy a term insurance for the same cover, the cost will be very cheap and even if I add this, Jeevan Labh fails to impress.