LIC Whole Life Limited Payment Policy Review

by Manshu on November 7, 2011

in Insurance

LIC Whole Life Limited Payment plan is an insurance policy that covers your life, and then at the time of maturity it pays you out a certain amount as well.

Technically the policy doesn’t mature because it is whole life assurance (and by this I mean I’m just repeating what their website says) but you get the sum assured plus all the bonuses 40 years from the date you start the policy provided you are 80 years old at the time.

So, if you are 39 years or younger you will only get the sum assured when you are 80, and if you are 40 or older then you will get the money in 40 years time.

You have the option of different premium payment terms in this plan – you can pay the premium just once at the beginning of the plan, pay it annually, pay it for 10 years or structure it in some other manner.

The insurance will last throughout the life time of course, and at age 80, you are guaranteed to get the sum assured back plus some variable returns based on the returns that LIC themselves generate.

These are variable and depend on what LIC earns way into the future.

I created a Google Spreadsheet to look at the IRR of these returns based on the illustrations of LIC and they range from 3.66% to 6.47% for the two options with periodic investments and from 4.5% to 7.5% for the one time investment.

These are of course all examples, and nothing is guaranteed in this. Here is the spreadsheet that you can look at and modify as well. Now, these are actually not bad returns when you think about the other products that we have reviewed here, but the trouble is with the relatively low sum assured, and how far out in the future the payment is made.

Vishal who brought this product to my notice said that his agent sent in a quote for a Rs. 35 lakh term insurance for Rs. 13,500 for 35 years, and he asked Vishal to take a look at this LIC Whole Life Payment policy where you pay Rs. 26,000 for 40 years to get a sum assured of Rs. 10 lakhs, and get Rs. 80 lakhs at the end of 40 years. That 80 lakhs is of course based on assumptions and for us I think it’s fair to think that the returns will be within the 3.5% to 6.5% range for this policy.

From the quotes that Mr. SM Gupta had shared on various sample term insurance plans, we know that you can easily get a policy of Rs. 25 lakhs from private players for a little more than Rs. 5,000 and you can then combine that with a policy from LIC to get additional coverage.

If this is the only insurance you’re going to get then that’s a bad idea, but if you have an insurance with a private insurer and want to supplement that with something from LIC then you may consider this keeping in mind the factors that we have talked about above.

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{ 6 comments… read them below or add one }

Anand November 7, 2011 at 10:10 AM

Manshu – Anything that yields less than 8-9% over the long term is not a great investment and I know you know this better than me! All Insurance plans other than Term Insurance plans should be shunned by retail investors as they all mix Insurance and Investment. Instead of pumping money into this plan people should pay off any high interest loans – including home loan (even if it taken at 8% fixed few years ago) to maximize their personal finances.


Manshu November 7, 2011 at 7:57 PM

Well, if you look at the comments on LIC Bima Bachat review or the ones about gold coins from post offices or banks, or even the NPS or NSEL ones – different people reach at different conclusions with the same facts. What changes is their own situation.

For someone who doesn’t have any loans and want to invest money in an instrument where he doesn’t have to furnish his PAN – the needs change dramatically compared with someone who his loaded with credit card debt.

To each his own.


Sumant November 7, 2011 at 1:53 PM

Great article as usual. One question on this part.

“I created a Google Spreadsheet to look at the IRR of these returns based on the illustrations of LIC and they range from 3.66% to 6.47% for the two options with periodic investments and from 4.5% to 7.5% for the one time investment.”

Did you subtract the cost of life cover before calculating the IRR? Since a part of the premium goes towards life cover, and the rest towards investment, I suppose it’d make sense to consider only the investment part.
LIC doesn’t provide a breakup of each component but we could take the cost of equivalent term life insurance to get the cost of life cover.

All said and done, i too think these policies are worse than even ULIPs (for the investor, not necessarily for the agent J )


Manshu November 7, 2011 at 8:00 PM

No, I didn’t because what premium do you choose? I mean the private insurers offer it for a lot less than LIC so do you choose that premium or the LIC premium?

Plus you are already dealing with returns that you have to foresee 40 years in the future so I didn’t want to add any more variables to that.

You can edit the sheet and do that yourself, but I didn’t want to include the calculations because of these two reasons.


Manish B Jain March 27, 2012 at 12:48 PM

LIC whole life limited payment policy, in my view go for the age group of 15 to 25 is a good choice, the premium for 50lakhs Sum assured is Rs: 89000 where bonus will be 3,50,000 every year, estimating the bonus of 70 per thousand…
Where as the premium for age of 35yrs and 50lakhs Sum assured will be around 153000 where as the bonus accumulation will be same 3,50,000 every year.
in both the above cases the Premium paying term is 35 yrs and policy will mature at 80 and cover whole life.


Amit sharma May 31, 2017 at 10:57 PM

Hi, great article.
Unfortunately I am also a victim of low cibil score and was looking measures to improve it. Will try the above actions. Thanks.


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