LIC Bima Jyoti (Plan No 860) – Features, Eligibility, Benefits and Review
LIC Bima Jyoti new plan is launched on 22nd February, 2021. LIC keep coming with new insurance plans at the end of the financial year to attract salaried individuals who are looking for tax savings in last minute. This is a non linked and limited period premium life insurance plan. There are several videos already created on Bima Jyoti LIC in Hindi indicating this as superb plan. Should you opt for LIC Bima Jyoti (Plan 860)? What are the various benefits available in LIC Bima Jyoti (Policy No 860)? What are the pros and cons in this plan. I would review and provide Bima Jyoti Plan details in this article.
Also Read: Best Life Insurance Company based on Claim Settlement Ratio of 2021
Features of LIC Bima Jyoti Plan 860
This is non-linked, non participating, individual, limited premium payment life insurance plan.
Guaranteed addition of Rs 50 per every Rs 1,000 basic sum assured for every completed policy year.
One can take 15 years to 20 year policy term.
The premium payment term would be 5 years less than policy term. E.g. if you take 20 year policy, the premium payment term would be only 15 years. If you take policy for 17 years, premium payment term would be 12 years.
Riders are available in this insurance plan.
This plan is available online and offline.
The minimum sum assured is Rs 1 lakh and no limit on the maximum sum assured.
Loan facility is available with specific T&Cs.
The premiums paid is eligible under an income tax exemption u/s 80c.
Who is eligible to take LIC Bima Jyoti Plan No 860?
Here are the eligibility details.
| Eligibility details for Bima Jyoti New LIC Plan | |
|---|---|
| Minimum age of entry | 90 days |
| Maximum age of entry | 65 years |
| Minimum age of maturity | 18 years |
| Maximum age of maturity | 75 years |
| Policy Term | 15 years to 20 years |
| Premium payment term | Policy term minus 5 years |
| Premium payment mode | Monthly, Quarterly, half year and yearly |
| Minimum Sum Assured | 1 Lakh |
| Maximum Sum Assured | No limit |
Benefits in LIC Bima Jyoti Plan 860 Policy
LIC Bima Jyoti Plan No 860 Policy 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:
i) On death before the commencement of Risk: Return of premium/s paid without interest shall be payable (excluding taxes). Underwriting charges and rider premiums might be chargeable (if any)
ii) On Death after the commencement of Risk: Death Benefit which is defined as the sum of “Sum Assured on Death” along with Guaranteed Additions (GA) shall be payable.
Sum Assured on Death: It would be higher of the following:
i) 125% of basic sum assured
ii) 7 times of annualized premium
ii) 105% of total premiums paid excluding taxes, underwriting charges and rider premiums
2) Maturity Benefit: On the life assured surviving till the end of the policy term, Sum Assured on Maturity (“Sum Assured on Maturity” is equal to Basic Sum Assured) is payable along Guaranteed Additions (GA).
Various Riders available in LIC Bima Jyoti Plan No 860
The following riders are available in this plan. However, these come with additional premium.
1) LIC’s Accidental Death and Disability Benefit Rider
2) LIC’s New Term Assurance Rider
3) LIC’s Accident Benefit Rider
4) LIC’s New Critical Illness Benefit Rider
5) LIC’s Premium Waiver Benefit Rider
Does this plan offer loan facility?
One can take loan on this life insurance plan. However, this comes with several terms and conditions.
One needs to pay two years premium to be eligible for a loan.
The maximum loan is 90% of the surrender value for policies in force. 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.
LIC Bima Jyoti Plan No 860 Calculator
Premium calculator for the LIC Bima Jyoti Plan is not yet available. We would update Bima Jyoti Premium Chart as soon as this is available.
What is Guaranteed Additions in this Bima Jyoti LIC plan?
Generally LIC plans offer a bonus in its life insurance plans. However, in this plan, it offers guaranteed addition of Rs 50 per thousand of basic sum assured which would be accrued by the end of every policy year.
In case of death of the policy holder, guaranteed additions would be done for the full policy year.
If premiums are not paid on time, guaranteed additions would cease to accrue.
If the policy is surrendered, guaranteed additions would be added in proportion to the premiums received for that year.
Let me explain to you on how Guaranteed Addition works
A person aged 20 takes this policy for 20 years. The premium payment term would be 5 years less than a policy term which is 15 years. Assume the person takes Rs 10 Lakhs sum assured plan.
Guaranteed addition = Rs 50 / Rs 1,000 basic sum assured
In this case guaranteed addition would be Rs 50,000 (Rs 50 / 1000 x 10,00,000) per year. For the 20 year policy term, the guaranteed addition would be Rs 10 Lakhs.
Means, a policy holder money would get doubled to Rs 20 Lakhs on maturity i.e. in 20 years.
How does Bima Jyoti Plan of LIC work exactly?
Example 1 – Person is 35 years, Policy is taken for 20 years. Premium payment is 5 years less i.e. 15 years. Assume the person opted for Rs 10 Lakhs sum assued, annual premium which would be approx Rs 83,600.
What the policy holder pays – Rs 83,600 x 15 years = Rs 12,54,000. But policy holder would have risk coverage till 20 years.
Death Benefit – If policy holder does, nominee / family would get Rs 10 Lakhs sum assured
Maturity Benefit – If policy holder survives till maturity date i.e. 20 years, he would get Sum assured of Rs 10 Lakhs + Guaranteed additions of Rs 10 Lakhs (Rs 50,000 per year x 20 years)= Rs 20 Lakhs.
Note this guaranteed addition is not added every year, it is added only at the end of the tenure. Means while it shows 5% returns, in reality, is 3.57% IRR. See table below.
| Year | Premuim paid | Guaranteed Addition | Payout |
|---|---|---|---|
| 1 | 83,600 | 50,000 | |
| 2 | 83,600 | 50,000 | |
| 3 | 83,600 | 50,000 | |
| 4 | 83,600 | 50,000 | |
| 5 | 83,600 | 50,000 | |
| 6 | 83,600 | 50,000 | |
| 7 | 83,600 | 50,000 | |
| 8 | 83,600 | 50,000 | |
| 9 | 83,600 | 50,000 | |
| 10 | 83,600 | 50,000 | |
| 11 | 83,600 | 50,000 | |
| 12 | 83,600 | 50,000 | |
| 13 | 83,600 | 50,000 | |
| 14 | 83,600 | 50,000 | |
| 15 | 83,600 | 50,000 | |
| 16 | 83,600 | 50,000 | |
| 17 | 83,600 | 50,000 | |
| 18 | 83,600 | 50,000 | |
| 19 | 83,600 | 50,000 | |
| 20 | 83,600 | 50,000 | 2,000,000 |
XIRR = 3.57%
Why to opt for LIC Bima Jyoti Plan No 860?
1) LIC is a trusted brand. One can safely consider its life insurance plans.
2) This life insurance plan comes with guaranteed additions of Rs 50 per every thousand basic sum assured which is like 5% simple interest.
3) One can take several optional riders (if required).
4) This plan can be taken online too, which would be easier for policyholders rather going to LIC branch to take this policy.
5) One can get income tax exemption us 80C upto Rs 1.5 Lakhs per year.
5) The maturity benefit / death benefit are exempted u/s 10 (10D).
Negative factors in this LIC Bima Jyoti Plan No 860
Now let us check on negative factors in this plan.
1) Though this plan provides Rs 50 guaranteed additions for every thousand basic sum assured, it is like simple interest rather than compounding interest. At the end of the policy year, one can expect less than 3.5% returns.
2) There are several terms and conditions applicable in case one want to take loan on this life insurance plan.
3) In case you miss the premium for any year, guaranteed additions would cease to accrue.
4) 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.
5) LIC offers a bonus to its policies. However, no bonus is offered in this plan.
Also Read: LIC Tech Term Vs Max Life Term Plan Plus – Which is better?
Should you opt for LIC Bima Jyoti Plan No 860?
LIC Bima Jyoti Plan No 860 is limited premium payment life insurance plan. It indicates Rs 50 as a guaranteed addition for every thousand basic sum assured. Such returns when compounded would provide 3.5% returns, however these are tax free. This plan comes with optional riders, however, one need to pay additional premium for that. While LIC is trusted brand, should you really consider such low return life insurance plans. Can you not consider a term insurance plan + invest the balance in a simple FD even if you are a low risk investor. If you are moderate to high risk, you can go for equity investments or mutual funds too. Think twice before opting such plans.
Note: We have provided this analysis with limited information available with us. We would update this post with any increment updates once complete details are available on LIC website.
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Thanks Suresh for the eye opening article.
I really appreciate your efforts which helps to understand the insight. Thanks alot
Thank you Nirmal