LIC Micro Bachat Insurance Plan No 851 – Should you invest?
LIC Micro Bachat Insurance Plan No 851 Review
LIC has launched a new plan, LIC Micro Bachat Insurance Plan No. 851 couple of days back. LIC Micro Bachat is a non-linked, participating, endowment insurance plan. After a long time, LIC has launched first of its kind that is micro insurance plan, hence everyone is checking whether there are any new features. What are the features of LIC Micro Bachat Insurance Plan No. 851? Who is eligible to take LIC Micro Bachat Insurance Plan No. 851? How are the Premiums in LIC Micro Bachat Insurance Plan? Should you invest in LIC Micro Bachat Insurance Plan No. 851?
What are Endowment Plans?
Since this is an endowment plan, let us first understand what is this all about.
An endowment plan is basically a life insurance policy which covers the life of the insured, helps the policyholder save regularly over a specific period of time so that he/she is able to get a lump sum amount on the policy maturity in case he/she survives the policy term. This maturity amount can be used to meet various financial needs such as funding one’s retirement, children’s education and/or marriage or buying a house, etc.If you are confused about the difference between Term insurance plan Vs Endowment plan, you can see this video.
Features of LIC Micro Bachat Insurance Plan No. 851
Here are the features of the LIC Micro Bachat Plan.
1) This is non-linked and participating insurance plan.
2) Any individual can take up this plan who is in 18 to 55 years of age.
3) This insurance plan offers protection + Savings.
4) This plan is available only for standard healthy lives without undergoing medical examination.
5) The tenure of the insurance plan is between 10 to 15 years.
6) Discount on premiums available for a high sum assured.
7) Loyalty additions after 5 years onwards provided all insurance premiums are paid.
8) There are 2 optional riders available in this plan.
9) Loans available on this insurance plan after full premium payment done for 3 years.
10) Income Tax Benefits available u/s 80C of income tax act.
11) This plan unique no. is UIN: 512N329V01
Who is eligible to take LIC Micro Bachat Insurance Plan No. 851?
Here is the eligibility criterion of this insurance plan.
1) Minimum age of entry is 18 years.
2) Maximum age of entry is 55 years. Maximum age of maturity should be 70 years.
3) Minimum Sum Assured is Rs 50,000.
4) Maximum Sum Assured – Rs 2 Lakhs. Means this is for very low income individuals.
5) Policy available for tenure of 10 years to 15 year term.
6) Premium Payment Term is same as policy term.
7) Date of commencement of risk is immediate from policy date.
What is the Sum Assured on Death in this LIC Micro Bachat Insurance Plan?
Sum Assured on Death is highest of the following:
a) 10 times of your annualized premiums
b) 105% of basic sum assured
c) Sum Assured on Maturity.
d) Basic Sum Assured or absolute amount assured to be paid on death.
Benefits available under LIC Micro Bachat Insurance Plan No. 851
Below are the benefits available under LIC Micro Bachat Insurance Plan No. 851.
1) Death Benefits
a) If death occurs within 5 years from the policy date, “Sum Assured on Death “would be paid to the nominee.
b) If death occurs after 5 years from the policy date, but before maturity, then “Sum Assured on Death” + Loyalty additions (if any) would be paid to the nominee.
2) Maturity Benefits
If the life assured is survived till maturity and all premiums are paid, then, “Sum Assured on Maturity” + Loyalty Additions (if any) would be paid to the to the life assured. Sum Assured on Maturity is equal to Basic Sum Assured.
3) Optional Riders available in this plan
Following are the optional riders available in this plan. The policy holder can choose any of them.
a) LIC’s Accidental Death & disability benefit rider
b) LIC’s Accident Death Benefit Rider.
What is Premium Payment Term under LIC Micro Bachat Insurance Plan No. 851?
The premium payment term is same as policy term. However, there is auto coverage for specific period.
1) If the premiums are paid for 3 years, insurance coverage would be covered for additional 6 months.
2) If the premiums are paid for 5 years, insurance coverage would be covered for additional 2 years.
Are there any Premium Rebates available in this LIC Micro Bachat Insurance Plan?
Yes, below are the premium rebates available in this plan.
1) If the premium is paid half yearly, 1% of tabular premium rebate available in this plan. If the premium is paid yearly, 2% of tabular premium rebate available in this plan.
2) If the basic sum assured considered is between Rs 1.5 Lakhs to Rs 1.95 Lakhs, 1.5% of BSA is given as high basic sum assured rebate. If the sum assured is Rs 2 Lakhs, 2% of the BSA is available as high sum assured rebated.
How are the Premiums in LIC Micro Bachat Insurance Plan?
Here are the premium charts indicated by LIC for every Rs 1,000 sum assured.
Example-1 – If a 35 years person is taking 15 year plan, he/she need to pay Rs 52.2 for every 1,000 sum assured. If they are taking Rs 1 Lakhs, they need to pay Rs 5,220 per annum (without any discounts/rebates) as premium.
Example-2 – If a 45 years person is taking 10 year plan, he/she need to pay Rs 87.6 for every 1,000 sum assured. If they are taking Rs 1 Lakhs, they need to pay Rs 8,760 per annum (without any discounts/rebates) as premium.
Here is the sample premium chart for every Rs 1,000 sum assured.
How much loan one can get under this insurance plan?
LIC offers a loan facility against this plan, however, with terms and conditions
1) If the policy is in-force, one can get up to 70% of the premiums paid as loan.
2) If the policy is paid-up, one can get up to 60% of the premiums paid as loan.
3) One can get this loan with an interest rate of 10.42% per annum.
What are the exclusions in this plan?
This policy would not provide risk coverage if the life insured commits suicide within 12 months from the date of commencement of risk.
What is the surrender value of the LIC Micro Bachat Plan?
One can surrender this insurance plan after payment of 1 full year insurance premium. The guaranteed Surrender value would be between 30% to 80% of the total premiums paid depending on the age and tenure of the plan taken. Here is the surrender value table.
LIC Micro Bachat Insurance Plan No. 851 explained with an example
Mr. Syed, aged 35 years has taken this insurance plan for Rs 1 Lakh Sum Assured and for 15 years tenure. The premium payable is approx. Rs 5,116 per annum.
1) Mr.Syed unfortunately dies after 5 years. His nominee would get Basic Sum assured i.e. Rs 1 Lakh.
2) Mr.Syed unfortunately dies after 10 years. His nominee would get Basic Sum assured + Loyalty Additions i.e. Rs 1 Lakh + 6,500 (Loyalty Addition) = Rs 106,500 in total
3) Mr.Syed survives till the end of the policy. He would minimum guaranteed basic sum assured of Rs 1 Lakh + Loyalty Addition of approx. Rs 11,500 = Rs 111,500.
You can go through below illustration chart.
Should you invest in LIC Micro Bachat Insurance Plan No. 851?
Let us see the Pros and Cons in this insurance plan before we conclude.
Pros: This insurance plan is a protection + savings plan. This comes with 2 optional benefit riders which are useful for life insured, however comes with additional premiums. Since its basic sum assured is maximum of Rs Lakhs, this is actually made up for small income individuals.
Negative points: This plan sum assured of Rs 2 Lakhs is very small that it is difficult to survive nowadays. There are no inbuilt riders and all 2 riders given are optional. Means, you need to pay additional premiums if you add such riders. Such plans come with low returns from LIC plans. One can expect anywhere between 4% to 8% returns per annum and nothing more than that.
Conclusion Summary: This can be termed as Mini Insurance Plan. One should ask themselves what they are expecting from this insurance plan. It has a low basic sum assured of Rs 2 Lakhs. LIC insurance plans would provide anywhere between 4% to 8% returns (considering loyalty additions in this plan). Is this what you are expecting? Why don’t you consider good mutual fund schemes for long term investment? If you don’t believe in equity or mutual funds or stock markets, you can at least consider a term insurance plan that comes with much lower premiums, but the high sum assured (only risk coverage is available). If you still want to go for some investment options that are low risk, you can consider the term insurance plan and invest the balance in PPF and Bank FD’s which would still offer higher returns.
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LIC Micro Bachat Insurance Plan No 851