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. 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.Read more
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, which are paid to the policyholder if he/she outlives the LIC policy tenure.
LIC’s Jeevan Labh also provides liquidity benefits through its loan facility.
Benefits under the LIC Jeevan Labh policy are as follows:
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.
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 + Final AB (Additional Bonus) if there is any.
|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)|
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Additional options available under LIC Jeevan Labh are as follows:
Disability Benefit and Accidental Death Rider
Accident Benefit Rider
New Term Assurance Rider
New Critical Illness Benefit Rider
Premium Waiver Benefit Rider
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.
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 returns.
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 fund will be more productive.
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 as compared to other kinds of funds.
The Securities and Exchange Board of India (SEBI) has established guidelines and divided them into the following sub-heads to bring uniformity to mutual funds based on the market capitalization sphere.
Larger Cap Equity Funds - 80% of large-cap equity funds should be invested in equity and equity-related instruments.
Mid-cap Equity Funds - 65% of mid-cap equity funds should be invested in equity and equity-related instruments.
Small-cap Equity Funds - 65% of mid-cap equity funds should be invested in equity and equity-related instruments.
Multi-Cap Equity Funds - 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% of stocks each in large-cap, mid-cap, and small-cap funds.
Flexi Cap Equity Funds - There is no such capping under Flexi cap equity funds.
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. It is ideal for investors not willing to take major risks. Categories under debt funds are:
|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 the 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 the investment portfolio is borne by the policyholder.
Balanced funds, as the name suggests, 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:
|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|
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 products.
|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|
LIC Jeevan Labh and Mutual Funds are two 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.
*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply
^Trad plans with a premium above 5 lakhs would be taxed as per applicable tax slabs post 31st march 2023
+Returns Since Inception of LIC Growth Fund
~Source - Google Review Rating available on:- http://bit.ly/3J20bXZ