LIC Bima Bachat Single Premium Insurance Plan-Review
LIC Bima Bachat Single Premium Insurance Plan-Review
Last week there were advertisements in leading financial news papers and FM Radio about LIC Bima Bachat Single Premium insurance plan. This is a money back policy where you get money back at specific intervals. In this article, I would articulate about its features and drawbacks of LIC Bima Bachat Single premium plan.
You may also like: Should you surrender your frontloaded old ULIP's
Features of LIC Bima Bachat Insurance plan
- You need to pay single premium for the entire tenure for this insurance plan.
- Insurance plan is available for 9 years, 12 years and 15 years period.
- Assured returns of 15% on Sum Assured (SA) every 3 years.
- If you retain the policy till the end of the policy period, loyalty additions if any, (but not guaranteed) would be paid.
- Maturity amount would be premium paid + loyalty additions (if any).
- On death of insured, sum assured is paid to nominee
- No riders available in this insurance plan
- This is the only insurance plan under money back policy which offers loan on the policy.
- Minimum sum assured is Rs 20,000 and maximum no limit
How does this work?
This insurance plan is available in 9 years, 12 years and 15 years tenure period.
- 9 years plan – You would get 15% returns each at the end of 3^{rd} year and at the end of 6^{th} year. After 9^{th} year, at maturity, premium amount is paid back to insured.
- 12 years plan – You would get 15% returns each at the end of 3^{rd} year, at the end of 6^{th} year and at the end of 12^{th} year. After 12^{th} year, at maturity, premium amount is paid back to insured.
- 15 years plan – You would get 15% returns each at the end of 3^{rd} year, at the end of 6^{th} year, at the end of 9^{th} year and at the end of 12^{th} year. After 15^{th} year, at maturity, premium amount is paid back to insured.
Let us discuss this with an example
If an individual of 30 years has taken this policy for 9 year period, this is how it would work out.
30 years age – 9 year policy – Single premium of Rs 66,816 for Rs 1 Lakh sum assured.
15% of Rs 1 Lakh is Rs 15,000
Receipts from this insurance plan would be:
- Rs 15,000 at the end of 3^{rd} year (15% of sum assured)
- Rs 15,000 at the end of 6^{th} year (15% of sum assured)
- Rs 66,816 at the end of 9^{th} year (Premium paid)
- total amount paid back would be Rs 96,816 in 9 years
If we consider single premium of Rs 66,816 paid for 9 years and consider subsequent payouts of Rs 15,000 every 3 years, the annualized returns would work out to be 5.1%. The loyalty bonus (not guaranteed) is not considered while computing the above.
Thought nothing is indicated on LIC website as bonus for this insurance policy (as on 28-Jul-13), some financial advisors are considering Rs 25,000 to Rs 27,000 for Rs 1 lakh insurance as bonus and revising the calculations to 9% returns considering such bonus. While in absence of information, we can consider a 7% to 8% returns on overall returns from such single premium plan.
Drawbacks of this policy
- The annualized returns without considering bonus/loyalty additions are low at 5.1%. Even if you consider taking a term insurance plan and investing the amounts in Bank FD or mutual funds or in Post office schemes, we would get better returns
- The loyalty additions are not guaranteed. This makes the policy unattractive.
- End of the policy period, if insured is survived, he would just get the amount of premium what he paid.
- This is the only money back insurance plan which offers loan on policy. However the interest rates are 9%+. So LIC would pay you 5.1% returns and charge you 9% if you take loan on this insurance plan
- Any returns on insurance plan would be tax free if the premium paid is less than 20% of sum assured. Since the premium paid is more than 65% of sum assured, the returns from such insurance plan is taxable. Post tax, the returns would be very low.
Also read: Why should you opt for Max Bupa Heartbeat Health insurance plan?
Conclusion: LIC Bima Bachat insurance plan is not an exciting plan. Though it provides insurance coverage along with 15% assured returns at the end of every three years on sum assured, considering overall returns, you can think of alternative options before proceeding for such insurance plan.
If you enjoyed this article, share it with your friends and colleagues through Facebook and twitter.
Suresh
LIC Bima Bachat Single Premium Insurance Plan-Review
you have not considered that entire sum assured will be given to nominee in case of death of policy holder dies any time before maturity without deducting the survival benefits already paid.
for example if aperson has taken policyfor 15 years say for Rs.500000 every 3 years he receives 75000
IF he dies in th14 the year he will receive 500000 full even though has receive Survival amounts, 75000×4=300000.
Loyalty addition projected as ‘nil’ is a too negative approach. All along the past LI C have given loyalty at the rate of 5% . Exaggerated figure not given. So this will be given positively. If this taken into consideration the return of 8% under the present diminishing interest rate @ banks is a reasonable one and why an assured one. Hence return with life cover under Bhima Bachat policy is a reasonable one
how do i surrender my policy ? what all do i hv to give them back ? i hv already got one return from LIC ? dont want to continu any further !
Just visit nearest LIC branch and surrender the policy document.