LIC Jeevan Labh Vs Mutual Funds

On one hand, LIC Jeevan Labh is a protection plus savings policy launched by the Life Insurance Corporation of India (LIC) for the financial protection of the family of the deceased policyholder. On the other hand, Mutual Funds are a type of financial instrument created by a pool of investments from several institutions and individuals.

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Two different classes of investments, LIC Jeevan labh and Mutual funds have their unique benefits and features. This article will walk you through the benefits and features of LIC Jeevan Labh and mutual funds separately and a detailed comparison between the two.

LIC Jeevan Labh

LIC Jeevan Labh is a combination of savings and protection. It is an individual, non-linked, participating, life assurance savings plan with unique features and benefits. LIC Jeevan Labh offers financial protection to the family of the policyholder in case of their untimely demise during the policy term. It also comes with a lump sum payment and survival benefit is paid to the policyholder if he/she outlives the policy tenure.

LIC’s Jeevan Labh also provides liquidity benefits through its loan facility.

Jeevan Labh LIC Policy Benefits

Benefits under the LIC Jeevan Labh policy are as follows:

  1. Death Benefit

    The death benefit covers the amount payable to the nominee of the policyholder in case of his/her untimely demise during the policy term. It is to be paid only if the policy is in force. The death benefit payable is:

    Sum Assured on Death + Vested Simple Reversionary Bonuses + Final AB (Additional Bonus) if there is any.

  2. Maturity Benefit

    If the policyholder survives the policy tenure, he/she is eligible for maturity benefits, only if all the policy premiums are duly paid in the past. It is to be paid only if the policy is in force.

    Maturity benefit payable is:

    Sum Assured on Maturity + Vested Simple Reversionary Bonus + Fi Final AB (Additional Bonus) if there is any.

Eligibility Conditions and Other Restrictions

Basic Sum Assured (Minimum)

 Rs.2,00,000

Basic Sum Assured (Maximum)

 No Limit

(The Basic Sum Assured shall be in multiples of Rs.10,000/-)

Policy term

16 years, 21 years, 25 years

Premium Paying Term

 10 years,  15 years, 16 years

Age at Entry (Minimum)

 8 years (completed)

Age at Entry (Maximum)

59 years (last birthday) for Policy Term

16 years

54 years (last birthday) for Policy Term

21 years

50 years (last birthday) for Policy Term

25 years

Maturity Age

 75 years (last birthday)

Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.

Options Available

Additional options available under LIC Jeevan Labh are as follows

  1. Rider Benefits

    • Disability Benefit and Accidental Death Rider
    • Accident Benefit Rider
    • New Term Assurance Rider
    • New Critical Illness Benefit Rider
    • Premium Waiver Benefit Rider
  2. Option to Take Death Benefit In Installment

    The death benefit can be paid in installments of 5 years, 10 years, or 15 years. It is paid in installments and not in lump sum only if the policy is in force.

    Rebates

    Mode Rebate

    Yearly mode

     2% of Tabular Premium

    Half-yearly mode

     1% of Tabular premium

    Quarterly, Monthly & SSS 

     NIL

    High Sum Assured Rebate

    Basic Sum Assured (B.S.A)

    Rebate (Rs.)

    Rs. 2,00,000 to Rs. 4,90,000 

     Nil

    Rs. 5,00,000 to Rs. 9,90,000 

     1.25% B.S.A.

    Rs. 10,00,000 to Rs. 14,90,000 

     1.50% B.S.A.

    Rs. 15,00,000 to and above 

     1.75% B.S.A.

Mutual funds

What is Mutual Fund?

One of the most popular investment options these days, mutual funds refer to a pool of accumulated sums by various investors. Mutual Funds are a type of financial instrument that is created by a pool of investments from several institutions (Asset Management Companies) and individuals to gain returns on the capital invested over a period.

Basically, in mutual funds, the accumulated sum is invested in different assets like liquid funds, debts, equities, etc. It is an excellent investment option for individual investors to get great exposure. The corpus of these funds is managed by a portfolio manager or portfolio manager, who is an investment professional.

Types of Mutual Funds

Mutual Fund is divided broadly as an Equity fund, Debt fund, and Balanced or Hybrid Fund depending on their equity exposure and asset allocation. Let us know more about these bifurcations to know which type of mutual funds will be more productive.

  1. Equity Funds

    Under this fund, the investment is made in equity and equity-linked securities. The minimum eligibility investment in equity under the scheme is 65% of its total portfolio. Generally, the return on equity funds is higher compared to other kinds of funds.

    The Securities and Exchange Board of India (SEBI), to bring uniformity to the mutual fund based on the market capitalization sphere, are divided into the following sub-heads.

    1. Larger Cap Equity Funds

      As per SEBIs guidelines, 80% of large-cap equity funds should be invested in equity and equity-related instruments.

    2. Mid-cap Equity Funds

      As per SEBIs guidelines, 65% of mid-cap equity funds should be invested in equity and equity-related instruments.

    3. Small-cap Equity Funds

      As per SEBIs guidelines, 65% of mid-cap equity funds should be invested in equity and equity-related instruments.

    4. Multi-Cap Equity Funds

      As per SEBIs guidelines, 75% of mid-cap equity funds should be invested in equity and equity-related instruments. In recent amendments by SEBI, it is mandatory to invest at least 25% stocks in each large-cap, mid-cap, and small-cap.

    5. Flexi Cap Equity Funds

      There is no such capping under Flexi cap equity funds.

  2. Debt Fund

    Debt funds are the funds in which 65% of its portfolio is invested in debt securities.

    Some common securities are money markets, fixed income treasury bills, government bonds, certificates of deposit, etc. instruments. It is ideal for investors not willing to take major risks. Categories under debt funds are

    Debt Funds

    Features

    Dynamic Bond Fund

    The Portfolio is influenced by interest rate fluctuation

    Income Fund

    Instruments with a maturity period of over 5 years

    Short and Ultra-Term Debt Fund

    Instruments that mature in 1 to 3 years

    Liquid Fund

    Funds invested in assets and securities that mature in 91 days or less, providing high returns

    Gilt Fund

    The Investment made in high-rated government securities to prevent the risk element

    Credit Opportunity Fund

    Investment in low rated securities that offer high returns, making it riskiest of all debt funds

    Fixed Maturity Plan

    Close-ended debt funds like government bonds where investment is made only during the offer period

    **”The investment risk in investment portfolio is borne by the policyholder”.

  3. Balanced or Hybrid Fund

    Balanced funds, as the name suggests, these funds are a combination of equity and debt funds. The main purpose is to balance the risk-reward ratio.

    The primary objective of the fund manager is to diversify the portfolio in sync with the market conditions for the investor’s benefit. Categories under Hybrid Funds are:

    Hybrid Funds

    Features

    Equity-Oriented Hybrid Fund

    65% of the portfolio is invested in equities and the rest in fixed-income instruments

    Debt-Oriented Hybrid Fund

    Must invest a minimum of 65% of the portfolio in debt instruments and the rest in equity

    Monthly Income Plan

    The major part is invested in debt instruments and under 20% of the portfolio in equities for steady returns monthly, quarterly, or annually

    Arbitrage Fund

    The aim is to maximize investment returns by buying securities at low prices in one money market and selling them in another money market at a comparatively higher price to make a profit

LIC Jeevan Labh Vs Mutual Funds

Even though LIC Jeevan Labh and Mutual funds are two different categories of investment altogether, still people compare them when they think of investments. Let us also look at LIC Jeevan Labh and Mutual fund’s basic features and benefits and compare them for a better understanding of the product.

LIC Jeevan Labh

Mutual funds

LIC Jeevan labh is a combination of investments plus savings

Mutual funds are a pure investment

LIC Jeevan labh can be surrendered only after 2 full years' premiums have been paid

Mutual funds come with flexible withdrawals keeping in mind the pre-exit penalty and exit load

It takes care of the liquidity through its loan facility

Investors can liquidate their units at any given time

There is no diversification option when you invest your money in just 1 plan

Mutual funds comprise many securities, hence making the portfolio of the investor diverse

Premiums need to be paid on time according to the policy term chosen

There is flexibility to invest in small or large amounts depending on the risk-taking appetite of the investor

There is a minimum and maximum age of entry to buy LIC Jeevan labh policy

There is no age restriction under mutual fund investments

Additional rider benefits are available under the policy

No rider benefits as such are provided under mutual funds

The policy is in existence for a defined policy tenure

Mutual funds do not have any tenure. One can invest any amount at any point in time

Wrapping it!

LIC Jeevan Labh and Mutual Funds are 2 different genres of investment. An investor should understand both concepts first before investing in any of the products for better and suitable returns. One needs to be very clear about the type of investment and the kind of return he/she is expecting in the future before going for any kind of investment.

Written By: PolicyBazaar - Updated: 20 September 2021
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