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LIC's Jeevan Aastha gets 8000 cr.

Despite the real return being between 4% and 7%, guaranteed by LIC, people seem to be enamoured by LIC’s Jeevan Aastha.

Despite the turmoil in the financial markets, Life Insurance Corporation’s Jeevan Aastha policy is on course to break the record for premia collection by a scheme in a single month. The policy has been lapped up by celebrities and middle-class investors alike during the 45-day window it was open for sale.

The policy, which closed on Wednesday, is expected to collect over Rs 8,000 crore. But some insiders said the collection could be higher. “The exact amount will take some time to collate. Some large proposers have deposited only a token amount as they did not want to lock their funds in case they did not clear the medical underwriting,” said an official. Although the corporation had said it was targeting Rs 25,000 crore, this was seen as a marketing gimmick and not a real target.

Sadly, even the “10% guaranteed return” was a marketing gimmick, and it’s entirely likely that the whole marketing infrastructure was paid obscene amounts of money and commissions to push the plan through. In a time when every asset class is losing value, people seem to clutch on anyone that they can trust who will guarantee a return, even if it’s low.

Having said that, there’s nothing wrong with the policy if you want to stay in for 10 years, and are happy with a post-tax 7% return. I’m quite sure we’ll ogle at that number in a few years.

  • Anonymous says:

    >What are the best investment instruments right now,both for the long term and short term?

    How do you rate ELSS now?

  • Anonymous says:

    >Actually I put some in it. specific reason: I can’t put more in PPF, reached limit, secondly I think knowing past record PPF’s current 8% may lower in next 10 years, For me I get 7.5% compound amd with addition I will get 8% which is comparable with PPF. Pl. suggest what alternate options for risk-free, guaranteed returns we have?

  • Deepak Shenoy says:

    >But in the same vein, Insurance returns may be taxed as well in 10 years. As PPF policies change, so will tax returns.

    Second, if you lock in for 10 years, you’ll have no liquidity (unless you take a hefty haircut) – so if interest rates go up, you lose.

    PPF is 8% compounded, Jeevan aastha is pushing it at 7.4% or so – the 0.6% may seem small but in 10 years it means you get 6,000 more per 50K invested, not a small sum. Remember if interest rates go up PPF rates will also improve.

    LIC isn’t risk free. Just because it’s government owned doesn’t mean it can’t “ditch” its customers. Remember UTI-64?

    For the same level of risk you could invest in the Bhavishya Nirman bonds (NABARD) – they provide an 8.51% return post tax, risk free as much as LIC, tax structure changes etc. If you did that you could make 49K go to 1.25L instead of the 1L that LIC gives you.

    Heck, LIC could take this money and put it in NABARD bonds, and make the additional amount as profit! Maybe that’s what they will do. Why not go direct?

  • Manish Chauhan says:

    >True , Jeevan Astha is not a product for young minds like us .

    Indians are emotional with there money and every company takes advantage of this weak point .