LIC Dhan Sanchay Plan 865 – Should you invest?
LIC has launched its new plan, LIC Dhan Sanchay Plan No 865. This is a life insurance savings plan that provides periodic payouts after the premium payment term is over. This is one of the worst plan being launched by LIC recently with so many complicated factors required to compute the benefits. What are the key features in LIC Dhan Sanchay Policy? Who is eligible to take this plan? Should you invest in LIC Dhan Sanchay Plan 865 or avoid?
Key Features of LIC Dhan Sanchay Policy No 865
LIC has launched Bima Ratna few weeks back and this is 2nd plan from them in this financial year.
- This is non linked, non participating, individual and life insurance savings plan.
- This plan provides life protection in case of unfortunate death of the life insured.
- It also provides guaranteed income stream during the payout period from the date of maturity.
- This plan comes with 4 benefit options a) Level income benefit b) increasing income benefit c) single premium level income benefit d) single premium enhanced cover with level income benefit.
- This plan can be purchased online or offline through agents or by visiting branch office.
- Any individual who is in the age group of 3 years to 65 years can purchase this plan.
- Policy tenure is 5 years to 15 years, depending on the option chosen.
- Payout period would be either equal to the premium paying term or equal to policy term depending on the option chosen.
- Minimum sum assured is Rs 2.5 Lacs.
Eligibility to take LIC Dhan Sanchay Plan
Benefit options in LIC Dhan Sanchay Plan No 865
Below are the benefit options available which needs to be selected while purchasing the policy. These cannot be changed later on.
I) Regular/ Limited premium payment option
- Option A: Level Income Benefit
- Option B: Increasing Income Benefit
II) Single premium payment option
- Option C: Single Premium Level Income Benefit
- Option D: Single Premium enhanced cover with Level Income Benefit
What is the date of commencement of risk in this plan?
In case the life insured is above 8 years, date of commencement of risk would be immediate.
In case the life insured is below 8 years, date of commencement of risk would be over 2 years of taking the plan or after attaining 8 years of age whichever is earlier. As an example, if the policy is taken for 7 years old child, the date of commencement of risk would be within 1 year i.e. after attaining 8 years of age.
What are various benefits in LIC Dhan Sanchay Policy?
A) Death Benefit
In case of unfortunate death of the life insured, the insurance company would pay “Sum Assured on Death” to the nominee. Sum assured on death would be:
- Option A & B: “Sum Assured on Death” shall be higher of 11 times of “Annualized Premium”; or “Sum Assured on Maturity”; or 105% of total premiums paid up to the date of death.
- Option C: “Sum Assured on Death” shall be higher of 1.25 times of “Single Premium” or “Sum Assured on Maturity”.
- Option D: “Sum Assured on Death” shall be 11 times of “Single Premium”.
Sum Assured on Maturity shall be equal to Annualized Premium or Single Premium, as applicable, multiplied by Maturity Benefit Multiplier.
B) Maturity Benefit
In case of survival of life insured, maturity benefit would be paid which is equal to Guaranteed Income Benefit + Guaranteed Terminal Benefit. Refer to brochure for more info on this LIC Dhan Sanchay Plan Calculator for benefits is little complicated. You can also refer LIC portal to check LIC Dhan Sanchay Plan Premium calculator.
What are various options in this plan?
There are 2 options available:
1) Rider Options:
Following riders are available in this plan.
- LIC’s Accidental Death and Disability Benefit Rider
- LIC’s New Term Assurance Rider
- LIC’s New Term Assurance Rider
- LIC’s New Critical Illness Benefit Rider
- LIC’s Premium Waiver Benefit Rider
2) Option to take the death benefit in installments:
In case of the death of the life insured, the nominee would have an option to choose the death benefit to receive in installments for the period of 5 years instead of a lump sum. Interest rate would be paid based last 5 years semi-annual G-Sec rate minus 2%.
What are modal loading in LIC Dhan Sanchay Plan No 865?
Modal loading is nothing but additional premiums to be paid.
- Yearly Premium mode – Nil
- Half-yearly Premium mode – 1.5%
- Quarterly mode – 2.5%
- Monthly mode – 3%
Is there any incentives for high premiums?
Depending on the premium payment term and tenure chosen, there is an incentive on the premiums paid which ranges between 0.2% to 2.25%. This incentive would come as a reduction in the premiums.
Positive Factors in LIC Dhan Sanchay
Here are the major positive factors in this plan.
- This is the life insurance savings plan. While it provides life protection, it also provides periodic payouts after the premium payment term.
- This plan provides incentives on premium between 0.2% to 2.25%.
- This plan is available both in online or offline. Last LIC plan was available only offline.
Negative or hidden factors in LIC Dhan Sanchay Plan No 865
Here are some negative or hidden factors in this plan.
- The maturity benefit is equal to guaranteed income benefit and guaranteed terminal benefit. These benefits are NOT simple to calculate. One need to compute with premium paid x guaranteed income benefit multiple x modal factor for guaranteed income benefit. One needs to refer to two different tables to get these multiples or modal factors. Not sure why LIC has such complicated formula to get simple benefits.
- If you opt for premium payment either monthly, quarterly or half yearly, you need to pay additional premiums.
- While LIC’s new plan offers a death benefit to be received in installments for 5 years, the actual interest rate payable is 2% lower than 5 Year G-Sec. The current applicable interest rate is 4%. One can simply put them in a bank savings account to get similar amount and need not keep such money with LIC. As an example if death benefit is Rs 50 Lakhs, LIC would pay Rs 2 Lacs interest per annum while one can put the same in simple bank savings account and get similar or higher amount.
- This LIC plan offer rider benefits, however, these would come with additional premiums.
- Guaranteed surrender value is 50% till 7 years of term and 90% once reached 10 years. If you made mistake by taking this plan and regret later-on, you need to loose money.
- In case life insured commits suicide within 12 months, only 80% of the total premiums paid would be returned to nominee/family members.
Should you invest in LIC Dhan Sanchay Plan 865?
LIC’s last plan was Bima Ratna which was simple to understand. This LIC Dhan Sanchay Policy is so much complicated to understand. Computation of benefits is much complicated. This is a life insurance savings plan with complicated features. Majority of LIC savings plans provide 4.5% to 5.5% returns. Investors need to consider all these factors, and should stay away from such plans. Better to consider a simple term insurance plans and invest balance in other investment options that can generate better returns.
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