LIC Bima Jyoti Insurance Plan – Positive and Negative / Hidden Factors
Recently LIC has launched Bima Jyoti Insurance Plan 860. There is a lot of hype got created before launching the plan. LIC Bima Jyoti is a non linked, non participating, life insurance plan. The policy guarantees Rs 50 addition, every year for every Rs 1,000 sum assured. This guaranteed addition is attracting people. What are the positive factors in LIC Bima Jyoti Insurance Plan? What are some of the negative or hidden factors you should know before opting this Bima Jyoti plan from LIC?
Overview of LIC Bima Jyoti Insurance Plan 860
While we have done complete review with features, eligibility of LIC Bima Jyoti earlier, let me provide a quick overview.
LIC Bima Jyoti is a non linked, non participating, limited premium payment life insurance plan. This is an endowment plan that can be bought online.
LIC Bima Jyoti Insurance Plan – Positive Factors
Here are some of the major positive factors in this life insurance plan.
1) Death Benefit: This life insurance plan has death benefit. Death benefit is payable either before the date of the commencement of the risk or after commencement of the risk.
In case death happens before commencement of risk, premiums paid (excluding taxes) would be paid back to the nominee.
In case death happens after the date of commencement of the risk, sum assured on death along with guaranteed additions is payable.
Sum assured on death would be higher of 125% of basic sum assured or 7 times of annualized premium. This would not be less than 105% of total premiums paid.
2) Maturity Benefits: This plan provides a maturity benefit. On survival of the life insured, “sum assured on maturity” along with guaranteed additions would be paid.
3) Guaranteed Additions: One of the key positive factor which has been highlighted about this plan is the guaranteed additions in this plan. This plan provides Rs 50 guaranteed addition, every year for every Rs 1,000 sum assured. This is like 5% simple interest on the sum assured which is also tax free.
4) Optional Riders: This plan provides facility to add optional riders. Below are the optional riders which one can opt.
LIC’s Accidental Death and Disability Benefit Rider UIN (512B209V02)
LIC’s Accident Benefit Rider UIN (512B203V03)
LIC’s New Term Assurance Rider (UIN 512B210V01)
LIC’s New Critical Illness Benefit Rider (UIN 512A212V02)
LIC’s Premium Waiver Benefit Rider (UIN: 512B204V03)
5) Maturity Benefit / Death Benefit in Installments: Many private insurance companies have this option of benefit payments in installment. Slowly LIC is also adopting this now. I am not talking about money back plans, but the maturity amount or death benefit payable in lump sum or in installments (if opted). LIC calls this as a settlement option where one can choose to get this maturity / death benefit in installments for 5 years, 10 years and 15 years time frame. Such installments would be paid in advance every year, half year, quarterly or monthly.
6) Rebate for Online Plan: This is one of the best positive factors in LIC Bima Jyoti. If the proposal is completed through online, one can get rebates on premium up to 10% on the tabular premium rates. If the premium payment term is 10 to 14 years, it would be 7.5% and if PPT is 15 years, it would be 10%.
7) Rebate on High Sum Assured: LIC Bima Jyoti high sum assured rebate is Rs 6 for every thousand sum assured for Rs 10 lakhs and above. This comes to approx. 0.6% on tabular premium.
8) Premium Payment Term: Premium payment term would be 5 years less than policy tenure. E.g. If you opt for 20 years, premium payment term would be 15 years.
9) Benefit under premium payment mode: If the policy holder is opting for annual premium, they would get a 2 % rebate of tabular premium. If the have opted for half yearly, they would get benefit of 1% of tabular premium.
10) Tax Benefit u/s 80c: For the premiums paid, one can get income tax benefit u/s 80c up to Rs 1.5 Lakhs in a financial year.
Negative / Hidden Factors in LIC Bima Jyoti Plan Insurance Plan
Here are some of the negative or hidden factors in this plan.
1) Guaranteed Additions, but its just simple returns: LIC provides guaranteed additions of Rs 50 for every Rs 1,000 sum assured which comes to 5%. However, this is not credited every year, it would be credited only at the end of policy tenure. E.g. if the policy tenure is 20 years, Rs 50 x 20 = Rs 1,000 would be credited for every Rs 1,000 sum assured at the end of 20 years. If sum assured is Rs 10 Lakhs, one would get guaranteed addition of Rs 10 Lakhs totaling to Rs 20 Lakhs. In reality, this 5% turns out to be 3.5% XIRR returns. Such returns are very low.
2) Death Benefit in case of policy holder < 8 years: The date of commencement of risk for < 8 years aged individual would start after 2 years of taking the policy or as soon as they attain 8 years of age. Till such time the, such death benefit would be just repayment of premiums.
3) Pay extra for Optional Riders: While the policy provides the optional riders, these come with additional premiums. This would increase your overall premium. Consider only term insurance riders if required.
4) To surrender Policy, pay 2 years premium: If you have taken the policy, but later realized, this is not a good plan, then you can surrender only after 2 years premiums are paid.
5) Loan after 2 years premium: If you have taken the policy, want a loan, then you can take a loan only after 2 years premiums are paid.
6) Medical exam if required: LIC Bima Jyoti policy is available with medical exams and non medical exam depending on certain age limit and sum assured. LIC does not clearly convey the details, but these would be alerted at specific point when you are buying it online.
If you enjoyed this article, share it with your friends and colleagues through Facebook and Twitter.
Thanks for sharing this detailed article.
जब बीमा धारक का उम्र 0 yr से 6 yrs हो तब risk cover 8th yrs से start होता है । आगे 7yrs से 12 yrs वालों का 2yrs complete होने पर risk cover start होता है।
यह एक savings with guaranteed taxfree return वाला LIC का जीवन बीमा पालिशी है, जो हम भारतीय लोगों की जन भावनाओ से जुडा है,जो अपने जीते जी निवेश + लाभ प्राप्त करना चाहते हैं।
Computing compunded returns is wrong Mr Suresh as your premium payment is staggered over multiple years and is not a one time outflow. Hence, you should ideally compute xirr returns. CAGR returns will always be lower in such cases as they presume total outflow on day 1 which supresses time value of money.
Thanks for highlighting. What I meant was XIRR. I have corrected the word. The XIRR returns indicated remains unchanged.