LIC Dhan Rekha (Plan No 863) – Review, Features and Benefits

LIC Dhan Rekha Plan No 863 - Features, Benefits, Negative points and reviewLIC Dhan Rekha Insurance Plan Details (Updated this post again after it is launched)

LIC comes with new insurance plans couple of months ahead of closure of the financial year. This time they are a little early. LIC has launched Dhan Rekha Plan No. 863. This LIC’s new plan is a money back plan with guaranteed additions. Recently we have seen several private insurance companies have come up with guaranteed plans. Now LIC is also following this route. In this article we would provide LIC Dhan Rekha Plan details,  features, benefits, why to invest, negative factors and complete review.

Also Read: Best 1 Crore Insurance Plan from LIC

Features of LIC Dhan Rekha Plan No 863

Dhan Rekha plan of LIC is launched on 13th December, 2021 (Source:Circular). Here are the key features:

1) It is non linked, non participating, individual, savings, money back plan.
2) This plan has a minimum sum assured of Rs 2 Lakhs and maximum no limit

3) Any individual who are in 90 days to 55/60 years of age is eligible to consider this plan. Below is the maximum age of entry.

Single Premium Limited Premium Term
60 55 20
50 45 30
40 35 40

4) Policy is available for 20, 30 and 40 year tenure.

5) This plan comes with a limited premium payment plan (to be paid for half of the policy term, either yearly, half year, quarterly and monthly) and single premium option.

6) There are guaranteed additions of Rs 50 per thousand sum assured depending on the tenure.

7) Plan is available both in online mode and offline mode. Under offline mode, one need to approach a LIC agent or LIC branch and buy this plan.

8) This plan offers loan facility for liquidity requirements

9) It comes with riders, however, it would come with additional premium.

What are Guaranteed Additions in LIC Dhan Rekha Policy?

Guaranteed additions depends on the policy tenure:

1) 6 to 20 years Tenure Plan – Guaranteed addition of Rs 50 for Rs 1,000 Sum Assured

2) 21 to 30 years Tenure Plan – Guaranteed addition of Rs 55 for Rs 1,000 Sum Assured

3) 31 to 40 years Tenure Plan – Guaranteed addition of Rs 60 for Rs 1,000 Sum Assured

This means that there is no guaranteed addition (GA) for 1 to 5 years tenure. This GA would also increase per thousand sum assured if you opt for a higher sum assured.

Benefits in LIC Dhan Rekha Policy

There are two benefits, i.e. death benefits and survival benefits.

#1 – Death Benefits in LIC Dhan Rekha

In case of unfortunate death of the policy holder, 125% of the sum assured or 7 times of annualised premium whichever is higher would be paid along with Guaranteed Additions would be paid to the nominee. The policy ceases after this.

#2 – Survival Benefits in Dhan Rekha Plan

The survival benefits of this LIC plan depend on the tenure of the plan opted by the policy holder.

# Policy with 20 Years Tenure

i) 10% of the sum assured would be paid at the end of 10th year and 15th year.

ii) There is no GA from 1st year to 5th year.

iii) From 6th to 20th year, guaranteed addition of Rs 50 per thousand sum assured would be paid on maturity along with the sum assured

# Policy with 30 Years Tenure

i) 10% of the sum assured would be paid at the end of 15th year, 20th year and 25th year ii) There is no GA from 1st year to 5th year.

iii) From 6th to 20th year, guaranteed addition of Rs 50 per thousand sum assured would be paid on maturity.

iv) From 21st to 30th year, guaranteed addition of Rs 55 per thousand sum assured would be paid on maturity along with the sum assured.

# Policy with 40 Years Tenure

i) 20% of the sum assured would be paid at the end of the 20th year, 25th year, 30th year and 35th year

ii) There is no GA from 1st year to 5th year.

iii) From 6th to 20th year, guaranteed addition of Rs 50 per thousand sum assured would be paid on maturity.

iv) From 21st to 30th year, guaranteed addition of Rs 55 per thousand sum assured would be paid on maturity.

iv) From 31st to 40th year, guaranteed addition of Rs 60 per thousand sum assured would be paid on maturity along with the sum assured.

LIC Dhan Rekha Plan – Explained with an illustration

Here is an example of how Dhan Rekha LIC Plan works. The sample is taken for Rs 10 Lakhs policy for 30 years policy tenure.

LIC Dhan Rekha - Explained with an example (illustration)

Here are the observations based on the illustration:

1) Policy holder would pay limited premium i.e. Half of the term. In this case, the policy tenure is 30 years, hence he/she would pay premium for 15 years. One should check how much premium need to be paid through LIC Dhan Rekha premium calculator which is yet to be released.

2) Money back after completion of premium payment term i.e. after 15 years, 20 years and 30 years. Considered 16th year, 21st year and 31st year as payout.

3) On maturity one would get guaranteed addition of Rs 50 per thousand sum assured. In this case Rs 50,000 per year is received from 6th to 20th year + Rs 55,000 per year from 21st year to 30th year is received by way of GA for Rs 10 Lakhs sum assured (Rs 50,000 x 21 years). This GA of Rs 13 Lakhs is paid on maturity.

4) Sum assured Rs 10 Lakhs + GA of Rs 13 Lakhs totaling to Rs 23 Lakhs is paid on maturity after the 30 year completion of tenure.

5) The IRR comes to 4.38% overall.

Why to invest in the LIC Dhan Rekha Plan?

Here are positive factors in this plan.

1) Policy holders would get regular money back every 5 years after half the policy term. If someone is looking for regular cash flow, they can opt the plan.

2) LIC offers guaranteed additions of Rs 50 / Rs 55 / Rs 60 per thousand sum assured payable on maturity. These are safe and guaranteed returns.

3) LIC is trusted brand. One can safely invest in their products.

Why not to invest in LIC Dhan Rekha Plan?

1) It offers guaranteed additions of 5% (Rs 50 per thousand sum assured) every year from 6th year to 20th year, 5.5% from 21st year to 30th year and 6% from 31st year to 40th year. Means’ one would not get anything for first 5 years. The second negative point is that GA amount is paid only at maturity. There are no compounding returns.

2) The IRR (Internal Rate of Return) is very low. As an example, for a 30 year policy for Rs 10 Lakhs policy, the IRR is at 4.38%. One can get higher returns even investing in a simple FD scheme.

3) If we consider inflation of 6% and IRR of LIC Dhan Rekha in the range of 4% to 5%, there would be negative returns of 1% to 2%. Investors should always invest in investments that can beat inflation. As an example, if one can invest in SIP mutual funds for long term of 20 to 30 years, we can expect 10% to 12% returns.

Should you invest in LIC Dhan Rekha Plan?

Dhan Rekha Insurance plan from LIC is a money back plan with guaranteed additions. The policy can provide returns between 4% to 5% along with life risk coverage.  If you are low risk investor, you can opt for a term insurance plan and invest the balance in a simple FD that can fetch you high returns compared to this insurance plan. If you can take some risk, consider investing in index funds or diversified portfolio of mutual funds that can fetch you 10% to 12% annualized returns. If you feel, it is safe to invest in LIC with returns of 4% to 5% returns, you can still opt for this LIC Dhan Rekha Insurance Plan. Choice is yours.

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Suresh KP

18 comments

  • sunandh Kumar

    lic 963 table
    term 40 years
    now in this policy
    policy holder intrest chenge to20 years term
    it is possible sir
    please tell us

    • Once you take it, you cannot change policy term. You can do paid-up policy after you pay certain premiums. You need to contact LIC for the exact term where you can do paid-up policy

  • naresh mahajan

    Its good plan I think in such a risky time of investment in which LIC giving guaranteed addition for future & we cannot forget insurance cover attach herewith

  • Kamal Garg

    Extremely analytical and right way to understand such investment products.
    It very clearly illustrates that if one were to survive the policy term, then, the RoI – IRR -would be 4.38% only which is abysmally low and even does not cover inflation part even.

    My view is that all LIC policies are fundamentally for the benefit of their agents who earn anywhere between 15% to 25% from first year premium and 5% as trail commission for the rest of the policy term.
    Absolute no-no.

    • Thanks for your comments Kamalji. If all of us can understand the pros, cons and alternative better investment options and if still the individuals wishes to consider in such LIC schemes, let them consider. Our goal is to educate them.

    • Sagar

      What happens if the insured dies at 5th year. He will get sum assured amount i.e. 10 Lac as per example shown. Does FD or mutual fund cover life? No.

      LIC policy’s main purpose is to cover life not to give you returns.

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