LIC's New Endowment Plan 914 Analysis: Should You Buy It?

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A Neutral Analysis of LIC New Endowment Plan 914.

How much wealth will LIC New Endowment plan 914 actually create or give guaranteed loss? It’s comparison with FD, PPF and mutual funds over 35 years. The value of cover for family? We have covered all these in this analysis for people who have bought or are considering this plan. We’ve checked the suitability of this plan with the claimed objectives. Analysis has been done on the direct impact on the future of an investor of this plan. Investors can take better decision without depending only on seller’s promise. You may bookmark this page for future reference.

Why We Have Analyzed LIC's New Endowment Plan.

Most people buy a plan because someone they trust told them to. Very few check the real numbers first.

You earn with effort. You save with discipline. You then invest. So, you have every right to know whether that money is working for you or against you.

Reality is that you have limited savings. Your wealth in future will depend on the maturity value of your investments. Invest your savings carefully.

How We Have Analyzed LIC's New Endowment Plan.

Central idea of this analysis are your wealth and your financial responsibilities in future with increasing costs. We’ve shown the impact of probable results of this plan on your life; negative or positive.

This is a direct, impact-based, neutral check. We have taken the plan's own numbers. We’ve compared them vs. plain, well-known options like FD, PPF and Mutual Funds. We have also checked the real wealth creation after adjusting for inflation, so you can see its real value, not just big-looking numbers. We have differentiated wealth creation and risk protection for your better understanding.

For the preparation of Planyourworld Analysis we have used the calculators available on Planyourworld.com. These are unique in India. They show the real wealth creation after adjusting for inflation, income tax, and the value of the maturity amount in today's term.

LIC's New Endowment Plan: Quick Summary of the Results.

LIC's New Endowment Plan promises to help you with two objectives: wealth creation with bonus, and risk protection for your family.

When we checked both parts on their own, both looked weak.

Risk Protection: The life cover is too less to protect a family. We have checked its life cover for the same risk premium vs. a term plan.

Wealth Building: In our analysis its actual rate of return came out close to 5.86% (you can check the actual rate of return you would receive in our Endowment Plan Wealth Calculator).

The wealth part gives loss of real wealth, in real terms (after adjusting for inflation). The maturity value is less than a plain FD or PPF. It blocks a big amount of your savings for 35 long years. It has a highly negative impact on your financial future.

The rest of this article walks you through the exact numbers, so you can judge for yourself.

PLANYOURWORLD WEALTH SCORE ⭐⭐☆☆☆ ⎢ 2/5 (loss of real wealth)

Promises of LIC's New Endowment Plan

Here is what LIC's New Endowment Plan promises, in simple terms with an example. Meet Ramesh. He is 23 years old today.

•     A basic sum assured, or life cover, of ₹5 lakh

•     An annual premium of ₹12,392

•     You pay the premium for the full term of 35 years

•     The plan matures when Ramesh turns 58

•     A bonus is added every year. Last declared bonus was ₹48 per ₹1,000 of sum assured (FY 2024-25), which works out to ₹24000 a year here.

•     At maturity, he’ll get back around ₹13,40,000

•     It is sold as a safe, with-profits, non-linked plan

One line needs a closer look. "With profits, non-linked" simply means the company takes your premium, invests it, and shares a part of its profit with you. That share is called bonus.

Years ago, a guaranteed bonus was fixed forever. If a company said 7%, it stayed 7%. Today the bonus is announced year after year. This year it may be ₹48 per ₹1,000. Next year it may be ₹38. You do not know it in advance.

Non-linked means the plan has no connection with the share market.

LIC's New Endowment Plan: What It Claims to Do.

People usually buy this kind of plan for two reasons:

•     Risk Protection: People want to protect their family if something happens to them.

•     Wealth Building: Investors want their money to grow into real wealth for future responsibilities.

This plan tries to do both jobs in one product. Let us check how it justifies both.

Before that, one small point on features. Imagine you go out for tea. The shop gives you a fine kulhad, or a brand-new cup. That is a feature. But you went there for the tea. If the tea is bad, the cup does not save the evening.

Same with any plan. Riders, loan facility, settlement options, all are cups. First check the tea. Does the plan protect your family? Does it build your wealth? Features come later.

LIC's New Endowment Plan: Analysis of Life Cover.

How much life insurance risk protection does a family need? Insurance is bought to protect your family for their entire lives:

Wife's expenses for entire life, education of children, settlement of children, prepayment of loans, in-total dignity of family forever.

Let us see how much protection this plan gives to your family, after you.

Ramesh is 23. His total yearly premium is ₹12,392. This is how the money splits between the life cover part and the wealth-building part:

•     Approximately ₹900 goes toward pure life cover, for ₹5 lakh of sum assured (vs. term plan for the same risk cover). At age 23, a larger cover would have cost even less per lakh.

•     The rest, about ₹11,492, goes into the wealth-building part (we shall check this in the wealth building section).

Now, is ₹5 lakh of life cover enough? Think about it plainly with these situations:

•     How much do you spend annually now?

•     How much loan do you have, and how will your dependents pay it?

•     Your child's school or college fees?

•     Your child's settlement?

•     Your loved one's day to day life?

Would ₹5 lakh be sufficient for now, and with the increasing costs of your responsibilities, if you are not there tomorrow? The honest answer is no.

Concept of Life Insurance As per Financial Planning

You will pay for your responsibilities and create wealth by age 55 or 60. You protect your family's future with insurance in case of untimely death in between.

In this article ahead, we have shown the path, how you can protect your family on your own without depending on advisors. Also, how you can do your own financial planning.

LIC's New Endowment Plan: How Much Wealth Can You Build?

Now, let us check the wealth creation from LIC's New Endowment Plan. Does maturity value mean wealth? "NO".

We shall check wealth creation in two parts:

Firstly, we’ll compare the maturity value.

Then, we’ll check the wealth creation, as it should be seen; after adjusting for increasing costs (inflation, future bills of all the responsibilities are rising with inflation).

If you invested the yearly amount of ₹11,492 (₹12,392 annual premium minus ₹900 risk premium) for 35 years, how much can you get?

LIC's New Endowment Plan, based on its own illustration and last declared bonus, would give you around ₹11,50,000. This makes its actual return close to 5.25% and a wealth creation of about -21.17%

One more point worth knowing. IRDAI allows companies to show illustrations at 4% and 8%. So, the paper you receive at the time of buying is an illustration, not a promise of 8%.

LIC's New Endowment Plan vs. FDs, PPF and Mutual Funds:

Let’s take a quick overview of wealth creation in this plan vs. other plain and simple options. If you invest the same amount in other places for the same period, we will see what amounts you can get after the 35-year period.

LIC's New Endowment Plan vs. Fixed Deposits

Fixed Deposits are the most common form of investment for Indian families. In our analysis we found that an FD can give you close to ₹17 lakh. Yes, this is for the same period and the same investment amount.

Even after paying 10% tax on the interest, the FD still ends up ahead of this plan.

Real wealth creation from all the options has been described below.

LIC's New Endowment Plan vs. PPF

Public Provident Fund is another popular category among investors. It is backed by the government, although its tax-free feature alone does not guarantee wealth creation.

LIC's New Endowment Plan vs. Mutual Funds (Commission-based/Regular Plan)

This is for a large-cap Mutual Fund plan which has the hidden commission of the distributor included (also called a regular plan). This commission is deducted on a daily basis at the time of NAV calculation, on your fund value, not on your investment. It may give you about ₹55,55,000 for the same investment and period.

(We have considered an average 12% rate of return over the whole period.)

LIC's New Endowment Plan vs. Mutual Funds (No Commission/Direct Plan).

This is for the same Mutual Fund scheme without the commission of the distributor (also called a direct plan). It could give you about ₹70,99,000 for the same investment and period. Anyone can get this value by learning money management.

(We have considered an average 13% rate of return over the whole period.)

Even a plain FD or PPF, both very safe and simple, could give you more than this plan. A Mutual Fund could give you far more in these 35 years.

People often say a term plan gives you nothing back. Look at the table again. You give up ₹900 a year, and in exchange your wealth part is free to grow properly. That is the whole point.

Concept of Wealth Creation

More wealth means more purchasing power. To be wealthy, you need to create purchasing power in future. So, you create wealth when you get more return than inflation.

LIC's New Endowment Plan: Real Wealth Creation Explained Practically

Ramesh chose a sum assured of ₹5 lakh. At age 23, ₹5 lakh felt like a decent amount. Salary was small. The number looked big enough.

Now think about the same ₹5 lakh differently. Say some job of yours costs ₹5 lakh today. Your child's college fee. A small house you have seen. A daughter's wedding.

At 7% inflation, that same ₹5 lakh job will cost close to ₹53,82,900 when Ramesh turns 58.

This plan will hand him about ₹13,40,000 on that day.

That is the real question. Not how big the maturity number looks. How much of your responsibility can it actually pay for.

You are committed to pay for your future goals. So, should you invest more? Or should you first check where you’re investing?

Stop Investing Blindly for Wealth Creation: Respect Your Hard-Earned Savings.

Do you have unlimited savings? Have you already arranged funds for your future goals? If yes, it hardly matters where you invest. If not, respect it.

It is the only thing that will take care of your future bills like: college fee of son and daughter, their marriage, your medical bills beyond insurance cover, 20 to 30 years of retirement and many more.

You ask any advisor about your future, and some plan is sold to you. In reality, 90% of people are investing in wrong investment products, without knowing the result.

Your responsibilities cannot be postponed. If you have limited savings to invest, your future depends on the maturities you will get in your bank account. It is a must to take suitable financial decisions for achievement of goals with less savings.

Does this plan suit your situation?

How to Know Which Plan is Right (Suitable) for You?

Every family has a different current situation. They have unique future needs. They need to make suitable investments and financial decisions; as per their age, career, savings, future expenses and all the goals. As shown above, investments must provide for a job that now costs ₹53,82,900. It looks difficult with limited savings. So, suitability to your current and future requirements becomes more important.

How to check suitability of plans when you have never taken training or education on investing and money management? To plan your own world, everyone must get trained. And take responsibility of their own investments.

You need three things to identify suitable investments for your family's better future and wealth:

•     Skills of money management

•     One decision: take the commitment to become your own financial advisor

•     Know your current situation and future goals

I have discussed all the three in short.

How Money Management Skills Help You Grow Real Wealth.

Everyone has their own opinion of money. Think, how have you made this opinion? Mostly from what you heard. From a friend, a relative, a banker, an agent. Opinions built on hearsay are costly.

Do you know how rich people create passive income with small amounts? It is the skill of wealth principles.

Skills of creating wealth give you freedom. You do not need to depend on others for advice. You start investing with clarity.

In my financial planning career of more than 20 years I have seen people struggling at retirement. It is due to one reason; they are not aware of all the strategies of a wealthy retirement. One can plan early retirement with less savings too.

Money skills allow you to save hidden commissions. Hidden commissions erode approximately 40% of your wealth by the age of 60.

Approximately 20 hours of knowledge can make you wealthy forever.

After learning, a question will strike in your mind. Why are these skills not shared with common people? With wealth skills you will be able to evaluate your current investments and take suitable decisions, after analyzing your situation.

Know Your Requirements and Situation.

Where are you today, financially? How much exactly do you save to invest? Is your money lying in bank accounts? What are the required future amounts for goals? What do your son and daughter want? How much do you need to retire?

What is the suitable plan for you?

A plan that suits your colleague may not suit you at all.

The Best Solution: Create Your Financial Plan - Become Your Own Financial Advisor

Where do people fail in investing, usually?

People save, then take advice from others. Product sellers and bankers project themselves as advisors. Investing on sellers' advice is financially fatal.

It is simple, easy and highly beneficial to be your own financial advisor. This is because good financial planners are very expensive and limited in number.

For this you may start your learning with Planyourworld Wealthy IQ, specially designed by financial planners for the common man. It can be covered in 6 hours.

The beauty of this course is that it works for people with no knowledge of finance.

Already Bought LIC's New Endowment Plan? Do This.

If you already hold LIC's New Endowment Plan, please do not panic.

Check the suitability of this product in your current situation and for future benefits. For this you may learn money management. Evaluate all your other investments too.

Or hire a good fee-based financial planner for your complete financial planning. This will set you on the right path.

Takeaway From Planyourworld Analysis: LIC's New Endowment Plan.

Plans like this look attractive on the surface; with a trusted name, and a bonus every year all add comfort.

Based on this analysis you can decide whether it suits your objectives or not.

One line is worth carrying home. If you need insurance, take insurance. If you want wealth, build wealth. Do not mix the two.

Ultimately, it is your money, so it is your own responsibility to take right decisions.

If this article helped you look at your own investments a little differently, that is a good first step towards your journey of learning to become your own financial advisor.

LIC's New Endowment Plan FAQs: Frequently Asked Questions.

1. What is LIC's New Endowment Plan?

LIC's New Endowment Plan is an insurance-cum-investment plan from LIC. It promises to help you with two objectives in the same product: a life cover for your family, and a savings part that grows with bonus. In our example, you pay ₹12,392 a year for 35 years for a ₹5 lakh sum assured, and you get back around ₹11,50,000 at maturity.

2. Is the LIC New Endowment Plan an investment plan or an insurance plan?

It tries to be both. But if you check each part on its own, both look weak. Compared vs. a term plan of the same cost, the life cover is too less to protect a family. The wealth part's maturity value is less than a plain FD. In most cases, mixing the two can compromise both goals.

3. What is the expected annual return of LIC's New Endowment Plan?

Out of the ₹12,392 yearly premium, about ₹900 is the pure risk cost and about ₹11,492 goes toward the maturity value. That ₹11,492 a year for 35 years grows to about ₹13,40,000. This makes its actual return close to 5.86%. Compare that vs. FD or PPF for the same money and same time, and both come out ahead.

4. Is the bonus in LIC's New Endowment Plan guaranteed?

The bonus is declared year after year, based on the company's experience. It is not fixed at the start for the whole term. In our calculation we used the last declared rate of ₹48 per ₹1,000 of sum assured. If a future year's bonus is lower, your maturity value will be lower too. Also remember, a guarantee only tells you the approximate amount. It says nothing about whether that amount will be enough for your goals.

5. How is the maturity amount calculated?

Maturity is the basic sum assured, plus the annual bonuses added over the years, plus a final additional bonus if declared. On a ₹5 lakh sum assured, a ₹48 per ₹1,000 bonus works out to ₹24000 for that year. Add up the years and you reach roughly ₹13,40,000 at the end of 35 years.

6. What is the eligibility and term of this plan?

The minimum basic sum assured is ₹1 lakh. Entry age runs from 8 years to 55 years. The policy term can go from 12 years up to 35 years, and premiums are paid through the term. LIC's New Endowment Plan Table 914 was withdrawn from sale on 30 September 2024 and replaced by Plan 714. Existing policies continue as they are.

7. Can a Fixed Deposit or PPF give more than LIC's New Endowment Plan?

Yes, both can. The same ₹11,492 a year, in a plain FD at 7%, grows to about ₹16,99,821. Even after 10% tax on interest, it is about ₹14,51,424. In PPF, the same amount could grow to roughly ₹17,38,000, tax-free and government-backed. More money, more safety, more peace of mind.

8. Can mutual funds create much higher wealth than LIC's New Endowment Plan?

Yes, they can. Their performance is linked to the market, unlike this plan. Over a long term such as 35 years, a commission-based mutual fund plan could give you around ₹55,55,000, and a direct plan with no commission could get close to ₹70,99,000. These figures are as per market experts and historical data. That is many times over what this plan promises, for the same yearly savings over the same period.

9. Can I surrender the policy or take a loan against it?

Yes, both options exist. The policy can be surrendered after the required premiums have been paid, and LIC pays the higher of the guaranteed surrender value and the special surrender value. A policy loan is also available once the policy has acquired value. Before acting on either, check the suitability of the plan in your own situation, or take help from a fee-based financial planner.

10. Does inflation reduce the real value of the maturity amount?

It does, and this is the part most people miss. ₹13,40,000 could sound like a big number today, but costs keep rising every year too. A job that costs ₹5 lakh today could cost close to ₹53,82,900 in 35 years, at 7% average inflation. So, the real question isn't how big the number looks. It is how much that number can actually pay for when you reach that goal.