What is the death benefit for LIC Jeevan Shanti?

The death benefit for LIC's New Jeevan Shanti (Plan No. 858) is equal to the higher of these two amounts:

• Purchase price plus accrued "Additional Benefit on Death" minus the total annuity amount already paid out till the date of death
• 105% of the purchase price (excluding any taxes paid)

Key Details of the Death Benefit

• No Maturity Benefit: There is no maturity benefit under LIC's New Jeevan Shanti; it is a pure deferred annuity plan.
• Payout Options for Nominees: The death benefit payable to the nominee(s) can be taken in different ways:
  • As a lump-sum payment
  • By annuitisation (utilizing the amount to purchase a new annuity plan)
  • In installments (over a chosen period, with an interest rate of 5.07% p.a. applied)
• Joint Life vs. Single Life:
  • Under Single Life options, the death benefit is payable upon the death of the annuitant.
  • Under Joint Life options, annuity payments continue during the lifetime of the surviving annuitant; the death benefit is paid only upon the death of the last survivor.
• Exclusion: A suicide exclusion applies within 12 months from the date of policy commencement or revival.

You can review the full plan terms directly via the LIC India Official Website.

The primary disadvantage of LIC Jeevan Shanti is that the regular annuity payouts are fixed and not adjusted for inflation, meaning their purchasing power decreases over time.

Key Drawbacks of LIC Jeevan Shanti

• No Inflation Protection: The annuity amount stays the same for your entire life. High inflation reduces the real value of your fixed income over the years.
• Fully Taxable Payouts: The pension or annuity income you receive is added to your total income and taxed according to your applicable income tax slab rate.
• Lower Relative Returns: Financial reviews indicate that the internal rate of return (IRR) from this single-premium plan is relatively low (often around 4% to 6%) compared to alternative investments like government bonds, debt mutual funds, or Public Provident Fund (PPF).
• Restricted Liquidity and Exit Options: Exiting the policy or surrendering it before maturity is difficult and may result in strict terms or unfavorable financial and tax implications.
• Suicide Clause Restriction: If the annuitant dies by suicide within 12 months of the policy start date, the plan becomes void, and LIC only refunds a portion of the premium or the surrender value.

The surrender value for LIC's New Jeevan Shanti after 5 years is the higher of the Guaranteed Surrender Value (GSV) or the Special Surrender Value (SSV).

Guaranteed Surrender Value (GSV) after 5 Years

For a policy surrendered in policy year 5 and above, the guaranteed factor is 90% of the purchase price.

• Formula: (GSV Factor × Purchase Price) minus total annuity amount payable up to the date of surrender
• GSV Factor: 90% (for Year 5 and later)

Special Surrender Value (SSV)

• Definition: A non-guaranteed value reviewed and determined by LIC based on market conditions and interest rates with prior approval from the IRDAI.
• LIC calculates the final payout by choosing whichever amount is higher between the GSV and the SSV. Any outstanding loan amounts and interest will be deducted from this final payout.

LIC's pure term insurance plans, such as LIC's New Tech-Term, are the best for a death benefit because they provide the highest financial payout to your family at the lowest cost.

Term Insurance Plans (Highest Payout)

• How they work: These are pure risk policies. They offer no money back if you survive the policy term.
• The benefit: All your money goes toward a large lump-sum payment for your family if you pass away.
• Top choices: LIC's New Tech-Term and LIC's Bima Kavach offer high coverage amounts (starting at ₹50 Lakhs or ₹2 Crores) with affordable premium rates.

Whole Life and Savings Plans (Lifelong Cover)

• How they work: Plans like LIC's Jeevan Utsav provide a death benefit alongside guaranteed regular income benefits while you are alive.
• The benefit: Your family gets a death payout whenever you pass away, even at an advanced age, plus yearly survival payouts.
• The trade-off: The premiums are much higher than a pure term plan for the same amount of death coverage.

Tips to Choose

• Pick a term plan if your main goal is replacing lost income and protecting young dependents.
• Pick a whole life or savings plan if you also want guaranteed cash flows while you grow older.

The death benefit amount from the Life Insurance Corporation of India (LIC) depends entirely on the specific policy you purchase, defined as the "Sum Assured on Death" plus any applicable bonuses or riders.

Because LIC offers many different insurance plans, there is no single fixed death benefit amount.

How LIC Calculates the Death Benefit

For most traditional plans (like endowment or whole life policies), the death benefit is generally calculated as:

• Sum Assured on Death: This is usually the highest of 10 times the annualized premium paid, or the absolute Basic Sum Assured. By rule, it cannot be less than 105% of all premiums paid up to the date of death.
• Accrued Bonuses: Vested Simple Reversionary Bonuses and Final Additional Bonuses (if declared by LIC) added over the active years of the policy.
• Optional Riders: Additional amounts if you added an accidental death benefit rider.

You can review specific plan structures and brochures directly on the LIC India Official Website.