LIC Premium Comparison: Why Term Insurance Costs 54 Times Less Than an Endowment for the Same Cover

Age 30, ₹50 lakh of cover, a 20-year term. Digi Term, LIC’s online term plan, prices that at ₹4,695 a year. New Endowment Plan, its plainest savings plan, prices the same ₹50 lakh over the same 20 years at ₹2,53,873 a year, about 54 times as much, for what a brochure would call, in each case, “₹50 lakh of cover.” Across every regular premium plan on sale that accepts the request, the spread is wider still, from ₹4,695 to ₹8,12,008. What each premium is funding explains the gap.

The comparison

Priced on the LIC premium calculator, each plan on its own tabular rate, same ₹50 lakh sum assured, same age 30, requested term 20 years. A plan sold only on fixed terms is priced on the nearest one it sells, which is why Jeevan Labh runs 21 years and the 25-year money back plan and Bima Lakshmi run 25:

Plan	Category	Years you pay	Premium a year	Total paid in	Return a year
Digi Term	Term	20	₹4,695	₹93,893	Nothing on survival
New Tech-Term	Term	20	₹5,250	₹1,05,000	Nothing on survival
Yuva Term	Term	20	₹5,950	₹1,19,000	Nothing on survival
Jeevan Umang	Whole life	30	₹1,41,057	₹42,31,718	5.47%
New Endowment Plan	Endowment	20	₹2,53,873	₹50,77,465	5.78%
Jeevan Lakshya	Endowment	17	₹2,84,833	₹48,42,156	5.85%
Bima Platinum	Endowment	18	₹2,96,666	₹53,39,988	4.97%
New Money Back Plan, 25 Years	Money back	20	₹2,99,635	₹59,92,700	5.75%
Jeevan Utsav	Whole life	16	₹3,01,348	₹48,21,566	5.62%
New Jeevan Anand	Endowment	20	₹3,05,666	₹61,13,326	4.44%
Jeevan Labh	Endowment	15	₹3,10,415	₹46,56,225	5.61%
Bima Shree	Money back	16	₹3,51,820	₹56,29,120	4.46%
New Money Back Plan, 20 Years	Money back	15	₹3,83,425	₹57,51,375	5.55%
Nav Jeevan Shree	Endowment	15	₹4,08,144	₹61,22,154	5.47%
New Jeevan Sathi Limited Premium	Endowment	15	₹4,10,703	₹61,60,540	4.14%
New Bima Jyoti	Endowment	15	₹4,14,378	₹62,15,671	3.52%
Bima Lakshmi	Endowment	15	₹8,12,008	₹1,21,80,123	4.74%

That is every regular premium plan on sale that accepts this request with level cover. Digi Credit Life and Yuva Credit Life also accept it, at ₹3,834 and ₹5,049 a year, but their cover falls each year like a loan balance, so they are not buying the same ₹50 lakh and are left out. Three plans price the same ₹50 lakh as a single payment rather than an annual one: the Single Premium Endowment Plan at ₹27,84,039 once, New Jeevan Sathi Single Premium at ₹39,36,889 once, and Jeevan Utsav Single Premium at ₹74,08,703 once. Neither kind belongs in the table above, because paying once and paying for twenty years are different commitments even when the sum assured printed on the policy is identical.

Several plans are not in it at all because LIC has withdrawn them and they cannot be bought new, among them New Jeevan Amar, Jeevan Kiran, Jeevan Azad, Bima Jyoti, Bima Ratna and Dhan Rekha. Anyone already holding one can still price it on that plan’s own calculator page.

Why term costs almost nothing

The three term plans pay nothing at all if you are alive at the end of the term. Every rupee of the premium funds one thing, the chance that LIC pays ₹50 lakh to your family before the term ends, and at age 30 that chance is small. There is no savings component to fund, so there is nothing pushing the premium up beyond the pure cost of that risk.

Every other plan in the table above is doing two jobs at once: carrying the same death cover, and building a savings pot that pays out on survival. The savings pot is the expensive part. It is also the part that makes the endowment and money back premiums a multiple of the term premium rather than a small step up from it.

Why the savings plans do not match each other either

Once a plan is funding a maturity payout rather than only a death benefit, the premium depends on exactly what it has promised to pay and when.

New Endowment Plan is the cheapest of the plans here that pay out at the end of a 20-year term, because it promises the least: the sum assured plus bonus, once, at the end of the term, and nothing before it. Jeevan Umang’s lower premium is not a cheaper version of the same thing; it is explained below.

New Money Back Plan, 25 Years costs more than New Endowment Plan for the same 20-year request because LIC actually prices it over its own fixed 25-year term, with payouts along the way, while still carrying the full sum assured at risk between those payouts. Paying survival benefits early and keeping the death cover in force the whole time is more expensive than paying once at the end.

Jeevan Labh and Jeevan Lakshya cost more than a plain endowment for a related reason: both fund a maturity payout from fewer premiums than the policy runs for. Jeevan Labh here is paid for in 15 years on a 21-year policy that keeps earning bonus for six years beyond that, so each of those 15 premiums has to carry more.

Jeevan Umang and Jeevan Utsav are whole life plans, and the table understates what they actually cost to run. Both are priced here on the longest premium term either one allows, because that is what produces the lowest annual figure the plan can honestly offer. Jeevan Umang pays 8% of the sum assured every year from the end of the premium term to age 100, so the premium term is not only how long you pay, it is also how soon that income starts and how many years of it LIC has to fund. On a 30-year premium term the ₹50 lakh policy above costs ₹1,41,057 a year, ₹42,31,718 in total, with income starting at 60. Take the same cover over 15 years instead of 30 and the annual premium nearly triples to ₹3,99,789, and the total paid in rises too, to ₹59,96,829, because the income now starts at 45 and LIC is funding fifteen more years of it. Check either plan’s own calculator page for the premium term you intend to pay for, not the one that makes the comparison table look best.

A plan LIC withdrew, and what it cost to run

Jeevan Kiran, no longer on sale, answers a question the table above cannot: what does it cost to add your premiums back at the end of a term plan?

At the same ₹50 lakh, age 30, 20-year profile, Jeevan Kiran priced at ₹24,229 a year, between four and five times New Tech-Term’s premium for the identical death cover. Over 20 years that is ₹4,84,586 paid in, and survive the term and LIC pays back exactly that: “total premiums received”, excluding taxes, as the brochure defines it. Not a rupee of interest is added for the years the money sat with LIC, so as a return on the money put in it is 0% a year. Return of premium is, in the numbers, buying back your own money at no interest.

What this tells you

The premium table is doing its job the moment you stop asking which row is cheapest and start asking which row is funding the same thing you want funded. A term plan and a savings plan answer different questions, so comparing their premiums answers neither one. Two savings plans, run at the premium term you intend to pay, is the comparison worth making, and it is the one the premium calculator runs for any age, term and sum assured you enter, not just the three used here.