It’s that time of the year when you have to submit the Investment Proofs (Tax saving investments) to your employers. It is also the right time for most of the Life Insurance / Financial advisors to push financial products in the name of tax benefit and insurance cover.
LIC has launched its second new plan of 2021 called – LIC Bachat Plus on 15th March, 2021. LIC Bachat Plus (Plan No.861) is a Traditional, Non-linked, Non-participating and Life Insurance Savings Plan.
Under this plan, the premium can be paid either as Lumpsum (Single Premium) or as Limited Premium with a Premium Payment Term of 5 years. The Policy shall participate in the profits in the form of Loyalty Additions.
This new plan is available for sale through online as well as offline modes, for a maximum period of 180 days from the launch date.
If you are unsure on which type of life insurance policy to buy, kindly go through the below article;
Benefits under LIC Bachat Plus Plan
Below are the maturity and death benefits under Bachat Plus Policy;
- Maturity Benefit under Bachat Plus :
If the Life Assured survives till the maturity of the policy, he/she will receive Sum Assured at maturity and Loyalty Addition (LA) is payable. Here, sum assured at maturity means basic sum assured. Kindly note that LA is not payable if you convert your policy to paid up. (Related article : What is Bonus or Loyalty Addition in LIC Policy?)
The maturity benefits can be received lump-sum (or) in installments of 5 yrs, 10 years or 15 years.
- Death Benefit under Bachat Plus Plan no 861 :
Here, the sum assured on death benefits is dependent on the type of Premium payment modes i.e., Single premium or Limited Premium. The quantum of premium and benefits will vary based on the option you choose here. The benefits are presented in the below table;
The Policyholder can opt for death benefit payment as lump-sum payment (or) installments for 5 yrs, 10 years or 15 years. The Death benefit that is payable under this policy is as below:-
A) Death during the first 5 years-
If death occurs before the commencement of risk, LIC will refund the premium without any interest.
If death occurs after the commencement of risk, then LIC will pay the nominee Sum Assured on Death.
B) Death after 5 years but before the maturity-
Sum Assured on Death+Loyalty Addition is payable to the nominee/beneficiary.
Eligibility Conditions under LIC Bachat Plus Policy
Below are the basic eligibility conditions of Bachat Plus Plan;
|Minimum Sum Assured||Rs 1,00,000|
|Maximum Sum Assured||No Upper Limit|
|Policy Tenure||Single Premium
10 – 25 yrs up to 40 yrs age
10 – 16 yrs for 41 to 44 yrs age under Option A
And 10 – 25 yrs under Option B
10 – 25 yrs for Option 1 & 2
|Premium Paying Term (PPT)||Option A & B -> Singe Premium
Option 1 &2 -> 5 yrs
|Minimum Entry Age||90 days for Option A & B
90 days for Option 1 & 40 yrs for Option 2
|Maximum Entry Age||44 yrs for Option A, 70 yrs for Option B
60 yrs for Option 1 & 65 yrs for Option 2
|Minimum age at maturity||18 years|
|Maximum age at maturity||65 yrs for Option A, 80 yrs for Option B
75 yrs for Option 1 & 80 yrs for Option 2
Illustration of LIC Bachat Plus Plan
Assuming an individual takes Bachat Plus policy with a tenure of 25 years for Rs 1 lakh sum assured. The premium paying term is 5 years.
At the end of policy tenure and on the life assured surviving to the end of the policy term, “Sum Assured on Maturity” along with accrued Loyalty Additions (if any), shall be payable as maturity benefit. (Where “Sum Assured on Maturity” is equal to the Basic Sum Assured.)
Maturity Benefit = Sum Assured + Loyalty Additions
LIC Bachat Plus Plan Returns Calculation
Let us consider an example – Mr Shah (35 year) wants to invest in LIC’s new plan Bachat Plus policy, with a Policy Term of 25 Yrs, Premium Paying Term 5 Yrs and for Sum Assured Rs 1 Lakh. The expected yearly premium will be Rs 9,215 (exluding GST).
As per the above calculation, the expected returns from LIC Bachat Plus would be around 6.6%.
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LIC Bachat Plus Plan – Should you Invest? | My Opinion
Kindly consider the below points before investing in LIC’s latest plan – Bachat Plus plan;
- Returns : As per the above calculations the IRR is around 6.5% which may look attractive given the current low-interest rate scenario that we are in. But, the interest rate cycle can move upwards over the next few years and this kind of return may look very low at that time. Also, note that we have assumed a high LA rate in the above calculation. So, if you are happy with 6% (long-term) returns on your investment (with almost no risk factor & tax-free income), you can consider investing in these kind of plans. Else, you have plethora of investment avenues to consider.
- Life Insurance Cover : The premium rates on Traditional plans are much higher than the term insurance plans. If you are buying an Endowment plan or money-back policy for life cover then kindly note that you are paying a very high premium for a low life cover. You can consider taking an online Term plan to get an adequate life insurance cover.
- Tax saving is an additional benefit : Insurance is primarily for Protection and not for saving Taxes. Kindly note that Tax saving is an additional benefit and should not be THE deciding factor when buying an insurance policy. Also, if you are opting for the new tax regime, note that you can not claim tax deductions u/s 80c.
- Erosion of wealth : Life insurance policies are long-term contracts. When you are investing for long-term, would you like to get decent inflation adjusted returns or not? Your endowment or money-back plans are low-yielding investments. These may give you negative inflation adjusted returns.
I am sure you are now very clear on how much returns can we expect from these kind of traditional policies. The Investment Returns of around 4% to 6% that too over a period of 10 to 25 years sounds very low for me. Kindly be aware of the pros & cons financial products before you invest. Let me know your views. Do share your comments. Cheers!
Continue reading :
- LIC New Plans 2020 – 2021 List | Features, Snapshot & Review of all the Plans
- Top 5 Best Online Term Life Insurance Plans | Comparison & FAQs
- Income Tax Deductions List FY 2020-21 | New Vs Old Tax Regime AY 2021-22
- Top 15 Best Mutual Funds 2021 & beyond | Top Performing Equity Funds
(The above article is based on the very limited available information, if required, the above information will be edited/updated). (Post first published on : 15-March-2021)