LIC Monthly Income Plan: The dream of a steady, passive income stream is a powerful one. Imagine a scenario where a modest investment of ₹2 Lakh could put ₹6,736 into your bank account, every single month, like clockwork. This is a claim that often circulates online, frequently linked to Life Insurance Corporation (LIC) of India plans.
But is it truly that straightforward? The short answer is: not exactly in the way it’s often presented. The world of insurance and investments is built on specifics, not generalizations. In this comprehensive guide, we will demystify this popular claim. We will explore how LIC’s plans can be structured to generate a monthly income, what the real numbers look like, and present you with a clear-eyed view to help you make an informed decision.
Understanding the Core Concept: It’s Not an “Investment,” It’s a “Policy”
First, it’s crucial to shift your mindset. LIC is primarily a life insurance company. When you pay a premium, you are first and foremost buying a life cover. The savings and income benefits are secondary, bundled components. The figure of ₹6,736 per month from ₹2 Lakh typically refers to the monthly payout from a Single Premium Annuity Plan.
Let’s break down what this means: LIC Monthly Income Plan
- Single Premium: You pay a lump sum amount one time (e.g., ₹2,00,000).
- Annuity: In return, the insurance company promises to pay you a regular income (the annuity) for a pre-defined period—this could be for life, for a guaranteed term (like 10, 15, 20 years), or a combination of both.
The exact monthly payout depends on the type of annuity you choose, your age, and the prevailing interest rates at the time of purchase.
Deconstructing the ₹6,736 Figure: A Realistic Calculation
While promotional material might highlight a specific high number, let’s see what a typical LIC annuity plan might offer for a ₹2 Lakh single premium today. The annuity rate (the percentage of your premium paid back to you annually) is key.
- Sample Calculation: LIC Monthly Income Plan
- Single Premium: ₹2,00,000
- Assumed Annuity Rate (for illustration): ~7.5% per annum. (This rate fluctuates; you must check LIC’s latest brochures).
- Annual Payout = ₹2,00,000 * 7.5% = ₹15,000
- Monthly Payout = ₹15,000 / 12 = ₹1,250
This ₹1,250 is a more realistic immediate monthly income from a ₹2 Lakh investment in a standard immediate annuity plan. So, where does the figure of ₹6,736 come from?
The Power of Time: The Jeevan Akshay VII (Plan 858) and Similar Plans
The higher figure often quoted is achievable, but not from a direct, immediate annuity of ₹2 Lakh. It is the result of a different kind of policy: a deferred annuity or, more commonly, the maturity benefit of a traditional endowment or money-back plan where the premiums are paid over time.
Let’s model a scenario to achieve a ₹6,736 monthly income:
- The Goal: Secure a corpus at retirement that is large enough to generate a monthly income of ₹6,736 through an annuity.
- The Math:
- To get an annual income of ₹6,736 * 12 = ₹80,832, you would need a corpus that, when invested in an annuity yielding ~7.5%, gives you this amount.
- Required Corpus = Desired Annual Income / Annuity Rate = ₹80,832 / 7.5% = ₹10,77,760 (approximately ₹10.78 Lakhs).
So, the real question becomes: How can you build a corpus of ~₹10.78 Lakhs?
This is where a long-term LIC endowment plan comes in. You don’t invest ₹2 Lakh as a single premium today. Instead, you invest a smaller amount annually over 15-20 years. The power of compounding bonuses declared by LIC helps this corpus grow.
- Illustrative Example (using a typical bonus structure):
- Policy: A participating endowment plan like Jeevan Labh.
- Policy Term: 20 years.
- Annual Premium: Let’s assume ~₹20,000.
- Total Premiums Paid over 20 years: ₹4,00,000 (This is the key—your total outflow is ₹4 Lakhs, not ₹2 Lakhs).
- Estimated Maturity Value (with accrued bonuses): This could easily be in the range of ₹10-12 Lakhs, depending on bonus rates.
At maturity, you receive this ₹10-12 Lakh corpus. You can then use this entire amount to purchase a Single Premium Annuity Plan (like Jeevan Akshay), which would then provide you with your desired monthly income of approximately ₹6,736 for the rest of your life.
Comparing LIC’s Income-Generating Plans
It’s not a one-size-fits-all approach. Here’s a comparison of relevant LIC plans:
- Jeevan Akshay VII (Plan 858): This is the flagship immediate annuity plan. You pay a single premium and start receiving income immediately. It offers multiple payout options (e.g., for life, with return of purchase price, joint life, etc.). The payout is highest for the “Life Only” option but ceases upon your death.
- Jeevan Shanti (Plan 850): A more flexible deferred and immediate annuity plan. It allows you to defer the income to a future date, which can result in a higher payout. You can also combine it with a lump sum at maturity.
- Money-Back Plans (e.g., Jeevan Umang – Plan 845): These plans provide periodic survival benefits (e.g., 15% of the Sum Assured every 3-4 years) throughout the policy term, acting as a regular income stream, plus a lump sum at maturity.
- Endowment Plans (e.g., Jeevan Labh – Plan 836): These are primarily savings-oriented plans that build a large corpus at the end of the term, which can then be converted into an annuity for monthly income, as explained earlier.
The Crucial Fine Print: What They Don’t Always Highlight
- Inflation is the Silent Killer: ₹6,736 per month might seem sufficient today, but what about in 20 years? Inflation will significantly erode its purchasing power. An income that seems adequate now may not cover basic expenses in the future.
- Liquidity is Zero: Once you purchase an annuity, your capital is locked in. You cannot withdraw the ₹10 Lakh corpus in an emergency. You only get the monthly payments.
- Tax Implications: The premiums you pay may be eligible for tax deduction under Section 80C. The maturity proceeds from endowment policies are tax-free under Section 10(10D), provided conditions are met. However, the monthly annuity income is treated as “Income from Other Sources” and is fully taxable as per your income tax slab.
- Returns are Modest: The primary goal of these plans is safety and guaranteed income, not high growth. The effective returns are often in the range of 5-7% p.a., which may be lower than pure equity-based investments over the long term.
Smart Alternatives to Build a Monthly Income
While LIC offers safety and guarantees, consider diversifying your strategy:
- Systematic Withdrawal Plan (SWP) from Mutual Funds: Build a corpus by investing in a mix of equity and debt mutual funds. Once the corpus is sizable, you can set up an SWP to withdraw a fixed amount (e.g., ₹6,736) every month. This offers higher potential growth and better liquidity.
- Senior Citizens’ Saving Scheme (SCSS): For those above 60, SCSS offers attractive, guaranteed interest rates paid out quarterly. It’s a government-backed, low-risk option.
- Post Office Monthly Income Scheme (POMIS): Another safe, government-backed avenue that provides a fixed monthly income.
- Dividend-Yielding Stocks and ETFs: For those with a higher risk appetite, a portfolio of stocks with a history of consistent dividends can provide a regular income.
Conclusion: LIC Monthly Income Plan
The promise of earning ₹6,736 every month from a ₹2 Lakh investment with LIC is a compelling but oversimplified headline. The reality is that achieving this level of secure, lifelong income requires a disciplined, long-term approach—typically involving a total investment of around ₹4 Lakh over 15-20 years in an endowment plan to build a corpus, which is then annuitized.
LIC’s annuity and endowment plans serve a specific purpose: they provide unparalleled safety, guarantees, and peace of mind for a risk-averse investor seeking a pension-like income. They are a cornerstone of a conservative retirement plan.
However, for those seeking to beat inflation and achieve higher long-term wealth creation, it is wise to use LIC plans as one part of a broader financial portfolio, complementing them with equity-linked investments. Always remember to read the policy document carefully, consult with a certified financial planner, and align any investment with your long-term goals, risk tolerance, and liquidity needs. Your financial future deserves a strategy, not just a catchy headline.
LIC’s Plan Finder Page: Click Here
Disclaimer: This article is for informational and educational purposes only. The figures used (₹2 Lakh, ₹6,736, bonus rates, annuity rates) are for illustrative calculations and may not reflect the exact returns from current LIC plans. The performance of participating policies depends on the future bonuses declared by LIC. Please consult the official LIC website or a licensed financial advisor before making any investment decisions.
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