LIC MICRO BACHAT Insurance Plan – Features & Review

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 insuranceis the simplest and most fundamentalinsuranceproduct. 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

LIC Plan no 851 LIC new plan LIC Micro Bachat Feb 2019
LIC Plan No 851 – Micro Bachat Insurance 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

LIC Micro Bachat insurance plan illustration example LIC new plan 2019 plan no 851
LIC’s New plan – LIC Micro Bachat – 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

LIC New Plan LIC Micro Bachat Returns Calculation example Returns on maturity IRR
LIC Micro Bachat – Returns on Maturity

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.

Affordable insurance cover for low income individuals in India
Low Cost Insurance Options in India!

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 :

(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)

  • RAJan says:

    Dear Prem,
    Don’t get emotional here. Plz understand that insurance is not an investment. It’s always wise to buy a term insurance instead of buying an endowment policy or a ULIP plan. There are numerous reasons for this.

  • Prem kumar says:

    You are highly overrated, why you always so vocal about term plan, when we get nothing after maturity of term policy,? saving is integral part of indian society. You are copying western society, where insurance, health cover are borne by Govt.but in India lot of people depend on small saving. 5% return is what u get from debt instruments, but no cover whereas micro bachat gives u cover with assured Govt. guaranteed sum assured. Also it’s more than any bank saving interest. don’t try to throw/misguide public by taking them into share market or volatile mutual funds. Think before answering.

    • Sreekanth Reddy says:

      Dear Prem,
      Thank you for sharing viewpoint!

      If your view is that this plan is a good investment option then I respect your opinion and its your conviction!
      But, if you say that we are trying to misguide blog readers here, I am not going to take it!

      Kindly answer my queries..

      1) What is the definition & purpose of Life insurance?
      2) When Social security is not available in India, what is the foremost priority to many of us (especially for the low income bread winners) – Insurance cover or Savings?
      3) Are you sure that there is no other long term savings product (Small savings) in India that can beat the returns generated by traditional life insurance plans like Micro bachat?
      4) Are you aware that LIC invests thousands of crores in Mutual funds/Stocks/Govt disinvestment plans?

      Kindly share your views..!

      • Prem says:

        1. Purpose of life insurance is to remain financial stable after demise of bread winner, which one only can get by LIC.
        2. When Social security is not ensured then lower income people go for saving & insurance mix, certainly not for mutual fund as u suggest always.
        3. sure, there is not a single product in India, that can give insurance cover along with saving element. Requirement of saving or insurance depends on person to person. If you have any single product, DO SHARE TO ALL.
        4. People trust LIC & it’s sovereign guarantee by GOI. LIC earns profit from Govt bonds, stocks, disinvestments, and accordingly share with its customers.
        Hope next time you will not misguide readers about LIC.

        • Sreekanth Reddy says:

          Dear Prem,
          This one sentence from your above comment -‘…….which one only can get by LIC’ sums up who is biased/misleading here!

          1 – We are of the view that mixing insurance & investment does not suit to majority of us. It is a costly mistake.
          Why do you think that only LIC can provide Life insurance on the demise of a bread winner? If so, why is that LIC’s premium quotes on term plans are still one of the highest ones in the industry? Why are they slow on providing Term plans through online mode?

          2 & 3 – When social security is not provided then best possible scenario is to buy low cost life insurance and save in right investment avenues. It may not be necessarily equity funds, it can be Public Provident Fund, Sukanya Samriddhi scheme etc.,

          4 – If people are trusting LIC, why are they losing their market share over the last few years?

          Kindly share your views!

    • RAJan says:

      One should buy an insurance policy , where the sum insured must be at least 10 times of your annual income . U practically cannot afford to buy ulip or conventional endowment policy because they can be very costly.

      For example if I buy LIC jeevan anand for 50 lakh sum insured, my premium will be 329039 whereas a term insurance from Maxlife for the same sum insured costs me 7552 annually.

      It’s just not about comparing the premium. What’s more important is your family is not protected

    • RAJan says:

      Now the second point is

      The returns

      An endowment policy or a ULIP {whether offered by LIC or any other company} is not the best investment option .

      There are numerous investment options available which can give far better returns than these plans.
      If u can afford to take sone risk, u can invest in equity , which my outperform every other investment option .

      Even if u don’t like to take any risk and if u would like to stay with LIC, I would suggest u to buy LIC’s online term insurance plan (though very costly), and invest your hard earned money in PPP, NSC, SSA…………

      Plz don’t take this one as argument. I m just sharing my knowledge what I have gained over the years.

  • prabha says:

    my mom and dad both are 54 age,
    My dad was doing small level business and mom house wife,
    can i apply this one to my parents (both),
    this is useful for my parents?

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