May you live a hundred years is something that parents say to their children as a blessing. All that parents ever wish is for their children to be happy and healthy. This parental pursuit is a long one, involving many things over several years as the child grows, seeking and discovering happiness in a variety of interests. Although life has its own unpredictable twists and turns, there are also ways to smartly address uncertainties – particularly the most critical ones involving money and finances.
Not just about the contingency fund
Financial security is not just about having a contingency fund or security umbrella. It also involves having a stable income stream to meet life’s daily expenses and needs. There is nothing more empowering in the journey to one’s dream than the surety of a stable, predictable income flow in the bank for years to come. Long-term security for the kids
Today, children are fortunate to be able to pursue a variety of vocations which were considered unlucrative in a different era – from being event planners to marine biologists or even full-time art-music performers.
This is unlike earlier when a stable government job was every parent’s dream for their child. Today’s parents support this passionate quest of their children by ensuring financial security in two ways – one, by making their own financials secure so that their burden does not fall on the children. Secondly, by making sure that their kids’ basic needs are taken care of even if it takes them time to earn enough on their own.
Various financial instruments can take care of these needs, but they do it separately. While one product may give steady income, another may give insurance cover for an unfortunate event. However, this one product from LIC can cover both well – steady income and sum assured benefit. This product – Jeevan Umang, comes with several other advantages.
Multiple benefits of Jeevan Umang
Here it is, in very simple terms. This product can give you a steady, predictable income stream as long as you live. Well, even till 100 years! It covers the risk of death with a sum assured that’s payable and comes with four additional riders that add further to its protective power. It is a participating policy, which, in simple terms means it accumulates bonuses each year. And, it has a favourable tax implication. Add to that rebates based on frequency of premium payment and amount of cover taken and the deal gets even better.
How it works
Here are the details: You need to invest for a certain premium paying term. There are four options available – 15, 20, 25 and 30 years. While the risk cover starts immediately if the policyholder is above 8 years, the steady income flow will start to the policyholder at the end of the premium payment term. This annual payback is 8% of sum assured. And, this stream can be considered endless since it can last till the policyholder turns 100 years of age. And, if the policyholder does manage to live for a century, the entire sum assured is paid back too along with bonuses. Can there be a better 100th-birthday gift than this? Now, let’s practically apply this. Not only is this a great tool to plan for retirement or earning uncertainty for you, it is also a great security for, say, your 15-year-old daughter. Assuming a premium paying term of a minimum 15 years, it means you would have arranged for a steady cash flow for her for several years with the income stream accruing to you.
The big tax advantage
The big advantage in this case is that this 8 per cent is completely tax free. Typically, annuities and pension plans paying such regular income have taxable payouts.
So, on a sum assured of Rs 1 crore, for which the annual premium for a 25 year old will be Rs 5,14,590 without GST, the policy-holder will get Rs 8,00,000 annually (tax free!) from the year he or she turns 45 till completion of 99 years of age or till death, whichever is earlier. That’s many years of income to support yourself and your family.
Not just income, but, also protection & some more
While steady income is a critical feature, it also has the classic insurance feature of protection against untimely unfortunate events in the life of the policyholder. The death benefit payable in this policy is at least 105% of total premiums paid. It can be the highest of – 10 times of annual premium or sum assured on maturity or basic sum assured. The other benefits an applicant may opt for depending on his or her eligibility are LIC’s Accidental Death and Disability Benefit Rider, Accident Benefit Rider, Term Assurance Rider and Critical Illness Benefit Rider.
Liquidity: Matures at 100 years, but doesn’t lock-in for that long
Apart from money back, the plan also provides liquidity for lump sum requirements through options of surrender of the policy as well as loan against the policy once it acquires surrender value. The loan amount can be equal to 90 per cent of the surrender value in case of an in-force policy (where all the premiums are paid till date) and 80 per cent of the surrender value in case of a paid-up policy.
The guaranteed life-long tax-free money back and whole-life insurance cover provide real peace of mind, as both the needs of the self and that of the dependents are taken care of with a single plan. The spectrum of use of this policy for various needs is very large – how it can be used to provide safety net for children has been explained above.
This policy is also useful for people planning their retirement, especially since income streams are needed for a longer period with the average age moving up. It fits people in vocations where earnings are short-lived or where job certainty is a factor. It can even be a good cover in later age if one falls ill and loses the source of income. It is a big safety net for women who choose to sacrifice lucrative careers to take care of their family. And, a great help to parents who must support dependent children with special needs even when they themselves do not have a job. It is no wonder then that this policy can bring umang in the lives of many people with many different needs.
(This article is sponsored by LIC of India)