LIC Dhan Varsha is a Non-Linked, Non-Participating, Individual, Single-Premium, and Guaranteed Life Insurance plan. The policy offers dual benefits of investment as well as life insurance coverage throughout the policy’s term for a single premium. The plan was introduced in 2022 by LIC under Table No. 866 and UIN 512N349V01 and has been withdrawn on 31st March 2023. After this, LIC launched a similar plan named LIC Dhan Vriddhi in June 2023.
If you want to know about the full details of LIC Dhan Varsha Review (2023), then this article will help you understand all the LIC Dhan Varsha Plan Details and LIC Dhan Varsha Policy Benefits.
Website link to Policy page – Link
Let’s move on to the details now.
LIC Dhan Varsha Plan (Plan 866): Features & Review
- LIC Dhan Varsha is a single premium guaranteed plan.
- Since this is a Single Premium plan, you need to pay the policy premium only once, at the time of buying LIC Dhan Varsha policy.
- Interestingly, the policy offers a choice of picking between 2 Sum Assured (SA) options. And this choice has a huge implication on taxation of the maturity amount. So there are two sum assured options. Option-1 is 1.25 times the Single Premium. Option-2 is 10 times the Single Premium. And once you choose the option at the start, it cannot be changed.
- There are just 2 options in Policy Term – 10 and 15 years.
- The Minimum Entry Age for the policy is 3 years for 15-year policy term and 8 years for 10-year policy term.
- The Minimum Maturity Age for the policy is 18 years.
- The Maximum Maturity Age for the policy is 75 years for Option-1 (SA = 1.25 times premium) and 50 years for Option-2 (SA = 10 times premium)
- The Minimum Basic Sum Assured is Rs 1.25 lakh for the policy.
- There is no upper limit on the Maximum Basic Sum Assured for this policy.
LIC Dhan Varsha – Choosing from 2 Sum Assured options
This is important. As I mentioned earlier, the choice of sum assured will decide your policy taxation! LIC Dhan Varsha plan offers 2 sum assured options to choose from:
- Option-1 – 1.25 times the Single Premium
- Option-2 – 10 times the Single Premium
Once you choose the option at the start, it cannot be changed later.
As per the current taxation rules in Section 10(10D) of the Income Tax Act, if the policy premium is greater than 10% of Sum Assured, then the maturity amount is taxable!
Ouch. And does this rule fit on LIC Dhan Varsha Plan?
Yes for the 1st option. As you see, in the first option the premium to be paid for LIC Single is one-time, and therefore a large amount which is a lot more than 10% of the sum assured (or sum assured being 10 times of premium). In fact, it is where sum assured is just 1.25 times the premium! And that makes the Option-1 of LIC Dhan Varsha maturity payout taxable as per your income tax slab.
In Option-2 (where Sum Assured is 10 times single premium), this condition is met and hence, the maturity proceeds will be tax exempted.
Also there is a Settlement Option for maturity benefit in LIC Dhan Varsha. The settlement option allows you to choose to receive your maturity benefit over the course of 5 years in equal payments rather than all at once. The Policyholder can take this option for all or a portion of the maturity profits payable under the policy while the Life Assured is still a minor or until the Life Assured is 18 years of age or older.
LIC Dhan Varsha Premium Samples
LIC has provided the sample illustrative single premiums for Basic Sum Assured of Rs 10 lakh:
- At the age 10 years, and policy term of 10 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 9,53,500.
- At the age 10 years, and policy term of 15 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 8,84,300.
- At the age 10 years, and policy term of 10 years, under the Option-2 (Sum Assured 10 times Single Premium), the one-time single premium is Rs 8,01,000.
- At the age 10 years, and policy term of 15 years, under the Option-2 (Sum Assured 10 times Single Premium), the one-time single premium is Rs 7,27,600.
- At the age 20 years, and policy term of 10 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 9,54,550.
- At the age 20 years, and policy term of 15 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 8,85,500.
- At the age 20 years, and policy term of 10 years, under the Option-2 (Sum Assured 10 times Single Premium), the one-time single premium is Rs 8,28,850.
- At the age 20 years, and policy term of 15 years, under the Option-2 (Sum Assured 10 times Single Premium), the one-time single premium is Rs 7,56,300.
- At the age 30 years, and policy term of 10 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 9,55,200.
- At the age 30 years, and policy term of 15 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 8,86,750.
- At the age 30 years, and policy term of 10 years, under the Option-2 (Sum Assured 10 times Single Premium), the one-time single premium is Rs 8,48,950.
- At the age 30 years, and policy term of 15 years, under the Option-2 (Sum Assured 10 times Single Premium), the one-time single premium is Rs 7,98,700.
- At the age 40 years, and policy term of 10 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 9,58,800.
- At the age 40 years, and policy term of 15 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 8,93,050.
- At the age 40 years, and policy term of 10 years, under the Option-2 (Sum Assured 10 times Single Premium), the one-time single premium is Rs 9,78,250.
- At the age 50 years, and policy term of 10 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 9,71,800.
- At the age 50 years, and policy term of 15 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 9,13,200.
- At the age 60 years, and policy term of 10 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 9,99,000.
- At the age 60 years, and policy term of 15 years, under the Option-1 (Sum Assured 1.25 times Single Premium), the one-time single premium is Rs 9,57,900.
LIC Dhan Varsha: Maturity Calculation & Guranteed Additions
The Maturity amount of LIC Dhan Varsha is calculated as = Basic Sum Assured + Accrued Guaranteed Additions
You chose the Basic Sum Assured at the time of policy purchase. And the sum assured determines your single premium. The Basic Sum Assured (SA) is used to calculate the guaranteed additions and hence the maturity amount.
Unlike other policies where every year, LIC declares LIC Bonus Rates, the Guaranteed additions for LIC Dhan Varsha are already fixed, pre-decided get added (accrue) to your policy at the end of each policy year but are paid out only once at the time of maturity/demise:
- For Basic Sum Assured between Rs 1.25 lakh and Rs 2.45 lakh, and going for the Option-1 (Sum Assured 1.25 times of Single Premium) and 10-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 60 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured between Rs 1.25 lakh and Rs 2.45 lakh, and going for the Option-1 (Sum Assured 1.25 times of Single Premium) and 15-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 65 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured between Rs 1.25 lakh and Rs 2.45 lakh, and going for the Option-2 (Sum Assured 10 times of Single Premium) and 10-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 25 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured between Rs 1.25 lakh and Rs 2.45 lakh, and going for the Option-2 (Sum Assured 10 times of Single Premium) and 15-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 30 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured between Rs 2.50 lakh and Rs 6.95 lakh, and going for the Option-1 (Sum Assured 1.25 times of Single Premium) and 10-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 65 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured between Rs 2.50 lakh and Rs 6.95 lakh, and going for the Option-1 (Sum Assured 1.25 times of Single Premium) and 15-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 70 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured between Rs 2.50 lakh and Rs 6.95 lakh, and going for the Option-2 (Sum Assured 10 times of Single Premium) and 10-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 30 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured between Rs 2.50 lakh and Rs 6.95 lakh, and going for the Option-2 (Sum Assured 10 times of Single Premium) and 15-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 35 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured above Rs 7 lakh, and going for the Option-1 (Sum Assured 1.25 times of Single Premium) and 10-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 70 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured above Rs 7 lakh, and going for the Option-1 (Sum Assured 1.25 times of Single Premium) and 15-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 75 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured above Rs 7 lakh, and going for the Option-2 (Sum Assured 10 times of Single Premium) and 10-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 35 per 1000 (thousand) of Sum Assured.
- For Basic Sum Assured above Rs 7 lakh, and going for the Option-2 (Sum Assured 10 times of Single Premium) and 15-year policy term, the pre-decided fixed Guaranteed Bonus Addition is done each year at the rate of Rs 40 per 1000 (thousand) of Sum Assured.
Related Reading – How to calculate LIC Bonus amount?
LIC Dhan Varsha Examples & Illustrations
LIC has provided interesting illustrations in its policy brochure.
Here is the 1st one:
In this, a 30-year old investor chooses Option-1 (Sum Assured equal to 1.25 times Annual Premium) and purchases this Rs 10 lakh sum assured, single premium LIC Dhan Varsha plan for 15-year policy term. The one-time premium for this comes to Rs 9.26 lakh.
Now the Sum Assured on Death is 1.25 times X Single Premium (before GST) = Rs 11.08 lakh
The Guaranteed Addition for Basic SA of Rs 10 lakh and Policy tenure of 15 years = Rs 75/ Rs 1000 of Sum Assured for Option 1. This comes to Rs 75,000 per year or Rs 11.25 lakh for 15 year policy term.
So the total Maturity amount = Basic Sum Assured + Accrued Guaranteed Additions, i.e. = Rs 10 lakh + Rs 11.25 lakh = Rs 21.25 lakh.
So let’s see what is the return of LIC Dhan Varsha policy in this case.
You invested one time Rs 9.26 lakh and at the end of 15 year term, your investment increased to Rs 21.25 lakh. This is a return (IRR) of just 5.7% per annum. And lets not forget that this is Option-1, and hence, the maturity amount above is fully taxable!
Here is the 2nd one:
In this, a 30-year old investor chooses Option-2 (Sum Assured equal to 10 times Annual Premium) and purchases this Rs 10 lakh sum assured, single premium LIC Dhan Varsha plan for 15-year policy term. The one-time premium for this comes to Rs 8.34 lakh.
Now the Sum Assured on Death is 10 times X Single Premium (before GST) = Rs 79.87 lakh
The Guaranteed Addition for Basic SA of Rs 10 lakh and Policy tenure of 15 years = Rs 40/ Rs 1000 of Sum Assured for Option 1. This comes to Rs 40,000 per year or Rs 6 lakh for 15 year policy term.
So the total Maturity amount = Basic Sum Assured + Accrued Guaranteed Additions, i.e. = Rs 10 lakh + Rs 6 lakh = Rs 16 lakh.
So let’s see what is the return of LIC Dhan Varsha policy in this case.
You invested one time Rs 8.34 lakh and at the end of 15 year term, your investment increased to Rs 16 lakh. This is a return (IRR) of just 4.43% per annum. But this amount is tax-free.
So the pre-tax returns are lower in Option-2 than Option 1 because Option 2 offers a higher life cover. Comparing the 2 options, we can see that while Option-1 will give higher returns and bigger corpus though life cover via sum assured will be bigger in Option-2.
That was about the calculation of returns using LIC Dhan Varsha Return Calculator.
Surrendering LIC Dhan Varsha (2023)
The policy can be surrendered by the Policyholder at any time during the policy term. On surrendering LIC policy before maturity, the LIC shall pay the Surrender Value equal to higher of Guaranteed Surrender Value and Special Surrender Value.
The Guaranteed Surrender Value (GSV) payable under the policy shall be:
- During the First three policy year: 75% of the Single Premium
- Thereafter: 90% of the Single Premium Single premium referred above shall not include taxes, extra premiums and rider premium(s), if any.
In addition, the surrender value of accrued Guaranteed Additions i.e. accrued Guaranteed Additions multiplied by GSV factor applicable to the accrued Guaranteed Additions, shall also be payable. These GSV factors expressed as percentages will depend on the policy term and policy year in which the policy is surrendered and are given below:
You will need to fill up the LIC Surrender Form and go to your nearest LIC branch office to surrender LIC Dhan Varsha
Loans under LIC Dhan Varsha
Loan can be availed under this plan at any time during the policy term after three months from completion of the policy (i.e. 3 months from the Date of issuance of policy) or after expiry of the free-look period, whichever is later subject to the terms and conditions as the Corporation may specify from time to time.
The maximum loan that can be granted as a percentage of surrender value is mentioned below:
The rate of loan interest applicable for full loan term, for the loan to be availed for every 12 months’ period from 1st May to 30th April shall not exceed 10 year G-Sec Rate p.a. compounding half-yearly as at the last trading date of previous financial year plus 300 basis points. For loan sanctioned during the 12 months period commencing from 1st May, 2022 to 30th April, 2023, the applicable interest rate shall be 9.5% p.a. compounding half-yearly. Any loan outstanding along with interest shall be recovered from the claim proceeds at the time of exit.
Suggested Reading – LIC has a similar single-premium endowment plan. You can read more about it here in LIC Single Premium Endowment plan review.
LIC Dhan Varsha: Should you invest?
While the product is very simple to understand (you pay once and get money with interest after few years), it is still a very low-return product.
Best to never mix investment and insurance – something on which ULIPs, endowment and moneyback plans are built on.
Hopefully, you would have found this LIC Dhan Varsha Review useful and the policy details and LIC Dhan Varsha Policy Benefits (2023) would be clear by now. But please make sure you understand and assess the suitability of this product first.