LIC’s New Bima Bachat: 2014

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LIC’s  New Bima Bachat(Plan No: 816)  is one among many single premium policies which off course gives liquidly but falls short when it comes to overall returns.  At the end of every three year, one will get a percentage of SA as survival benefit. Maturity will be premium paid + Loyalty addition .Policy is available for 9, 12, 15 year terms.



Death benefits:

·        During first five policy years: SA

·        After first five policy years: SA + Loyalty Addition.

Survival and Maturity Benefit:

Survival benefit explained in following table.

Maturity amount will not include taxes and extra premium paid.

 
9 Years
12 years
15 years
End of 3rd year
15% of SA
15% of SA
15% of SA
End of 6th Year
15% of SA
15% of SA
15% of SA
End of 9th Year
Premium Paid + LA
15% of SA
15% of SA
End of 12th Year
NA
Premium Paid + LA
15% of SA
End of 15th year
 
NA
 Premium Paid + LA

 

Basic Conditions:

 

·        Minimum Entry Age:  15 Years.

·        Maximum entry age :

o   66 years (nearest birthday) for term 9 years

o   63 years (nearest birthday) for term 12 years

o   60 years (nearest birthday) for term 15 years

·        Policy Term: 9, 12 or 15 years.

·        Minimum Sum Assured :

o   Rs.35,000 for term 9 years

o   Rs.50,000 for term 12 years

o   Rs.70,000 for term 15 years

·        Maximum Sum assured no limit

·        Premium payment mode : Single Premium

 After going through the complexity of terms and conditions, let us come straight to the returns it offers.

Beauty of Money Back plan lies in the fact that it provides liquidity. Single premium you pay is paid in parts as a survival benefit. Another important point is even if one dies in the middle of the term and has already received survival benefits, the nominee will still get full SA. However, this feature comes with a cost.

Assuming a person with 35 years of age opts for 15 years term. He will have to pay single premium of Rs. 77680 for a SA of Rs. 1 Lac.

After every three years, he will get Rs. 15000 as survival benefit. If we count compounded returns for 3 years on single premium paid; it comes to appx 6%. It will continue for every three years until 12th Year. On maturity: single premium (the amount is excluding tax and extra premium) along with loyalty addition will be paid. Going by the LIC’s illustration, if it pays Rs. 21000 Loyalty addition, the return turns out for last 3 years is 9%.

Single Premium
Policy year
Money Back
Loyalty Addition
compounded Return
77680
3
15000
0
6.% appx for 3 year
77680
6
15000
0
6.% appx for 3 year
77680
9
15000
0
6.% appx for 3 year
77680
12
15000
0
6.% appx for 3 year
 
15
77680
21000
9% appx for 3 year

So to conclude; policy can be purchased only if one is fine with low return + Insurance cover it offers.

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