LIC has launched a new non-linked, participating, endowment insurance plan called – LIC Micro Bachat (Plan no 851) on 18th February, 2019. It is a protection cum savings oriented life insurance plan
LIC is aiming at the low income group with Micro Bachat insurance plan, as the maximum Sum Assured offered under this is Rs 2 Lakh only.
Before discussing about the features of LIC Micro Bachat Plan, let’s understand the different types of Traditional Life Insurance plans.
- What is an Endowment plan? – It is a combination of insurance and investment. The insured will get a lump sum along with bonuses (if any) on policy maturity (or) on death event.
- What is an ‘Whole-Life Insurance Plan’? – It is a life insurance policy which is guaranteed to remain in force for the insured’s entire lifetime. The Sum assured is paid to the Policyholder’s nominee in the event the insured dies.
- What are Money-back policies? – They provides life coverage during the term of the policy and the maturity benefits are paid in installments by way of Survival Benefits (money-back payments).
- What is Term Life Insurance Plan? – Term insurance is the simplest and most fundamental insurance product. These insurance plans are designed to ensure that in the event of the policyholder’s death, the family gets the sum assured (the cover amount). Term plan provides risk coverage for a certain period of time (policy term/duration). If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid. It is the cheapest form of Life insurance in terms of premium.
Key Features of LIC Micro Bachat Plan
- Minimum Age at entry : 18 years
- Maximum age at entry : 55 years
- Minimum basic sum assured (BSA) : Rs 50,000
- Maximum basic sum assured (BSA) : Rs 2,00,000
- Policy term and premium paying term : 10 to 15 years
- Optional Riders : LIC Accidental & Disability Rider
- Surrender option: The policy can be surrendered after payment of 1 full year policy premium.
- Bonuses : Loyalty additions are payable provided minimum 5 full year policy premiums are paid.
Death & Maturity Benefits under LIC Micro Bachat Plan
LIC Micro Bachat – Death Benefit
- If death occurs within 5 years from the policy date, “Sum Assured on Death “would be paid to the nominee.
- If death occurs after 5 years from the policy date, but before maturity, then “Sum Assured on Death” + Loyalty additions (if any) would be paid to the nominee. Sum Assured on death is highest of the following;
- 10 times of your annualized premiums
- 105% of basic sum assured
- Sum Assured on Maturity.
- Basic Sum Assured or absolute amount assured to be paid on death.
LIC Micro Bachat – Maturity Benefit
If the life assured survives till maturity and all premiums are paid, then, “Sum Assured on Maturity” + Loyalty Additions (if any) would be paid to the to the life assured. Sum Assured on Maturity is equal to Basic Sum Assured.
LIC Micro Bachat Life Insurance Plan – Illustration
Mr. Shah, aged 35 years has taken this insurance plan for Rs 1 Lakh Sum Assured and for 15 years tenure. The premium payable is approx. Rs 5,116 per annum (excluding taxes).
If the policyholder unfortunately dies after 5 years, his nominee would get Basic Sum assured of Rs 1 Lakh.
In case, Mr Shah unfortunately dies after 10 years, his nominee would get Basic Sum assured + Loyalty Additions i.e. Rs 1 Lakh + Loyalty Additions accumulated till 10 policy years (bonuses).
If Mr Shah survives till the end of the policy then he would receive minimum guaranteed basic sum assured of Rs 1 Lakh + Loyalty Additions.
LIC Micro Bachat Plan – Returns Calculation
As per the above calculation, the expected returns on maturity from LIC Micro Bachat policy can be around 4 to 5%.
Should you invest in LIC Micro Bachat Plan? – My Opinion
The main target investors for this plan can be Low income group individuals and families. But, to get an insurance cover for Rs 1 Lakh, a 35 year old male has to invest around Rs 5,000 pa. Is n’t this a high cost plan? It is prudent not to mix Protection (insurance) and Savings in one Plan.
In fact, a 35 year old, non-smoker, can get a life insurance cover of Rs 50 Lakh with a tenure of 15 years by paying a premium of Rs 6,000 (excluding taxes) under LIC’c e-Term plan itself.
The primary objective for a majority of low income individuals should be to get low cost life insurance cover. For example : One can get a cover of Rs 2 Lakh by paying just Rs 330 pa under Pradhan Mantri Jeevan Jyoti Bima Yojana.
Even from ‘Return on investment’ viewpoint, these kind of traditional life insurance plans can at best give you 4 to 5% only. Do note that the returns are highly dependent on the quantum of Loyalty Additions.
Under this plan, Loyalty Additions are not payable in the first 5 policy years. So, unfortunately if a policy holder dies within 5 years from the commencement of policy date, LA are not payable.
Hence, I believe that it is advisable to avoid investing in LIC Micro Bachat Plan.
Continue reading :
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- Pradhan Mantri Shram Yogi Maan-Dhan (PMSYM) – Rs 3,000 pm Govt Pension Scheme – Details & Features
- Review & Snapshot of all LIC New Plans 2018-2019
(Reference : LIC Product Brochure) (The above provided information is based on the limited available data, if required, this article will be edited/updated) (Post first published on : 20-February-2019)