LIC Bachat Plus (Plan No 861) – Should you Invest?

LIC Bachat Plus Plan no-861LIC Bachat Plus (Plan No 861) – Should you Invest?

LIC has launched its 2nd insurance plan in 2021 named “Bachat Plus” now.  LIC keep coming with new life insurance savings plans during the financial year ended to attract salaried individuals who are looking for last minute tax savings. LIC Bachat Plus is traditional, non linked, non participating and life insurance savings plan. Should you opt for LIC Bachat Plus (Plan No 861)? What are the various benefits available in LIC Bachat Plus Policy No 861? Are there any negative points in this Bachat Plus LIC plan? Should you invest in LIC Bachat Plus Plan no 861?

LIC has earlier launched Bima Jyoti Insurance Plan and this is their second insurance plan in 2021.

Features of LIC Bachat Plan No 861

This is non-linked, non participating, life insurance savings plan.

One can consider single premium or limited premium with the premium payment term of 5 years.

This Bachat Plus LIC shall participate in the profits of the corporation in the form of Loyalty Additions (LA).

This plan is available in offline and online modes.

This insurance plan is available only for 180 days, i.e. 6 months from the date of launch. This plan is launched on 15-March-2021, hence one can consider this plan within 6 months from this date.

There are multiple options available in this plan. In single premium plan, these are called Option-A and Option-B. In case of a limited premium plan, these are called Option-1 and Option-2.

This is an endowment plan with tenure between 10 years to 25 years, depending on the option chosen by the policyholder.

The minimum sum assured is Rs 1 lakh and no limit on the maximum sum assured.

The plan will be available for both Non-medical and medical schemes depending on the total Non medical limit, age and chosen sum assured.

Nominee can choose an option to take the death benefit in installments.

This plan is available for NRI’s also with certain conditions.

Riders are available in this insurance plan.

Loan facility is available with specific T&Cs.

The premiums paid is eligible under an income tax exemption u/s 80c.

This plan unique number is UIN: 512N340V01

Who is eligible to take LIC Bachat Plus?

Here are the eligibility details.

LIC Bachat Plus - Eligibility, Sum Assured, Policy Tenure

Benefits in LIC Bachat Plan

LIC Bachat Plus Plan No 861 offers the following benefits provided that the policy is in force:

1) Death Benefit: On the death of the Life Assured during the policy term:

A) Death occurred during first 5 years

On death before the commencement of Risk: LIC would pay refund the premiums (excluding taxes) without any interest.

 On Death after the commencement of Risk: Death Benefit which is defined as the sum of “Sum Assured on Death” shall be payable.

B) Death occurred after 5 years from policy but before the maturity

Sum assured on death along with Loyalty Additions (LA) is payable to the nominee of the policy.

Sum Assured on Death:  This is little tricky computations. Let me put them in tabular form for better understanding.

LIC Bachat Plus - Death Benefit payable in this insurance plan

2) Maturity Benefit: On the policy holder surviving till the end of the policy term, Sum Assured on Maturity (“Sum Assured on Maturity” is equal to the Basic Sum Assured) is payable along Loyalty Additions (LA).

Various Riders available in LIC Bachat Plus Plan 861

The following riders are available in this plan. However, these come with additional premium.

LIC’s Accidental Death and Disability Benefit Rider

LIC’s New Term Assurance Rider

What is Loyalty Addition that is offered in LIC Bachat Plus – Plan no 861?

LIC would pay loyalty additions which are from surplus / profits from the company.

Loyalty additions are paid, provided the policy has completed 5 years and all premiums are paid. Such Loyalty Additions would depend on LIC experience and this policy shall be eligible for a share of surplus / profits in the form of Loyalty Addition at the time of exit (in case of death or on maturity) at such rate which is declared by LIC.

Additionally, Loyalty Addition, if any, shall also be considered in the special surrender value calculation on surrender of the policy during the policy term under both single premium and limited premium payment policies, provided the policy complete 5 years and all premiums are paid.

Loyalty Addition shall not be payable under a paid-up policy.

Can I surrender LIC Bachat Plus, if yes can I get full value?

Yes, but T&C would depend on single premium or limited premium options

In single premium payment, this policy can be surrendered by the policy holder at any time during the policy term.

Under limited premium payment, the policy can be surrendered at any time provided 2 full years premium has been paid.

LIC would pay higher of the Guaranteed Surrender value and special surrender value.

The guaranteed surrender value would be as follows:

Single Premium plan – First year – 75% of single premium, thereafter 90% of single premium.

Limited Premium plan – The guaranteed surrender value would be a multiplication factor of total premiums paid x guaranteed surrender value factor.

Does this plan offer loan facility?

One can take loan on this life insurance plan. However, this comes with several terms and conditions.

In single premium plan, one can take loan after 3 months from the policy date which would be a maximum loan of 90% of the surrender value for policies in force.

In case of a limited premium plan, two full year premium needs to be paid to be eligible for a loan. The eligible loan would be 90% of the surrender value. For paid-up policies it would be 80% of the surrender value.

The rate of interest on such loan would be determined by LIC

If there is default of loan EMI (principal + interest) and such pending payments exceeds surrender value, LIC is entitled to foreclose such policies.

Option to take the death benefit in installment

LIC provides an option for nominee to take the death benefit in installment instead of a lump sum. One can choose 5, 10, 15 years period. Here is the minimum installment details.

LIC Bachat Plus - Death Benefit in installment

LIC Bachat Plus Online Calculator

Premium calculator for the LIC Bachat Plus Plan is not yet available. If you want to check the premium now, the only way is to visit online link and enter your personal details and enter the sum assured. LIC customer support may also call you to check the status.

LIC Bachat Plus Plan – Explained with an example

Let me explain LIC Bachat Plus with an example.

Mr.Pankaj, 35 years considers this policy with premium payment term of 5 years and Sum Assured is Rs 1 Lakh. Loyalty addition is considered as Rs 1,000 for every Rs 1,000 sum assured for 25 years time frame.

LIC Bachat Plus - Returns computation - Illustration by example

Why to invest in LIC Bachat Plus?

LIC is a trusted brand. One can safely consider its life insurance-cum savings plans.

This life insurance plan comes with loyalty additions. Such loyalty additions can go up to 100% of the sum assured for a 25 year tenure.

One can take optional riders (if required).

This plan can be taken online too, which would be easier for policyholders rather going to LIC branch to take this policy.

One can get income tax exemption us 80C up to Rs 1.5 Lakhs per year.

The maturity benefit / death benefit are exempted u/s 10 (10D).

Negative factors in this LIC Bachat Plus Plan

Now let us check on negative factors in this plan.

Though this plan indicates loyalty additions, these are not guaranteed. This would be at the discretion of the LIC and depends on surplus/profits from LIC.

There are several terms and conditions applicable in case one want to take loan on this life insurance plan.

This life insurance plan comes with riders, however, one need to pay additional premiums to opt for such riders. This would increase the premium of the plan.

LIC offers a bonus to its policies. However, no bonus is offered in this plan.

In case the policyholder commits suicide within 1 year, LIC would refund the premiums paid, to the nominee.

How to buy LIC Bachat Plus Online?

You can visit this link and buy this LIC Bachat Plus online.

Should you opt for LIC Bachat Plus (Plan No 861)?

Here are my thoughts.

LIC Bachat Plus comes with limited premium (5 years) and single premium options.

It indicates loyalty additions which is payable on death or on maturity (value not guaranteed). Such returns when compounded would provide 6.57% IRR and these are tax free.

This plan comes with optional riders, however, one need to pay additional premium for that.

This plan is better compared to LIC Bima Jyoti launched earlier in 2021, where the returns were merely 3.5%.

Low risk investors can opt for Bachat Plus LIC plan that comes with 6.5% returns along with risk coverage. Moderate to high risk investors can consider a LIC term insurance plan / any other term plan and for balance they invest in direct equity or mutual funds or fixed income options based on their risk appetite and financial goals that can generate high returns in such long term of 10 to 25 years.

Source: LIC Bachat Plus Policy Brochure

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Suresh KP

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