Should You Invest In LIC's New Bima Shree Plan?

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LIC came up with its new Money back offering named LIC Bima Shree (Plan no. 848) on March 16, 2018. It is a non linked, money back, limited premium payment with guaranteed additions plan. As LIC is the most trusted brand among all insurers in the country, you may be wondering whether the new investment offer by LIC is suitable for you or not. So here is a breakdown with all the features and benefits of the plan.

A typical money back plan offers life coverage during the term of the plan and maturity benefit is provided in installments as per pre-defined terms and conditions at regular intervals.

1. Eligibility:

The plan targets the HNI class with a minimum sum assured value of Rs. 10 lakhs.

Eligibility for LIC Bima Shree Plan 848 
Minimum SA Rs. 10 lakhs
Maximum SA No Limit
Minimum age at entry 8 years
Policy term 14, 16, 18, 20 years
Premium Payment term Policy term less 4 years
Maximum age at entry 55 for 14 years, 51 years for policy term of 16 yrs, 48 yrs for 18 years term, 45 years for 20 years term
Risk commencement date From the date of policy issuance
 

2. Features:

1. Policy acquires Paid-up status after 2 years: LIC Bima Shree plan qualifies for paid-up value immediately after the completion of 2 years. As else in the other LIC policies, premiums have to be serviced for three continuous years to yield paid-up value.
2. Loan available after 1 policy year
3. Policy can be surrendered immediately after completion of 2 policy years.
4. Mode of premium payment include yearly, half-yearly, quarterly or monthly.
5. Inbuilt critical illness benefit in which 15 illnesses are included
6. Available rider options- Accident Benefit, Accidental Death and Disability Benefit, Critical Illness rider, New Term Assurance Rider and premium waiver rider.

3. Guaranteed Addition benefit


For the first 5 policy years- Rs. 50 per Rs.1,000 Sum Assured
From the 6th year to premium paying term, the guaranteed addition of Rs.55 per Rs.1,000 Sum Assured is provided.
Loyalty addition is also paid either at policy maturity or death of the policyholder

4.Death benefit:

i) If death of policyholder occurs in first 5 policy years then

Sum Assured on death plus Guaranteed Addition at Rs.50 per Rs.1,000 Sum Assured.

ii) If death happens anytime between 6th policy year and policy maturity then the sum payable is

Sum Assured on death + Guaranteed Addition (for first 5 years Guaranteed Addition will be at Rs.50 per Rs.1,000 Sum Assured and from 6th year onward it will be Rs.55 per Rs.1,000 Sum Assured)+Loyalty Addition.

 

5. Survival benefit:

If the policyholder survives through the policy term then survival benefit is provided as in the table below:

Policy term Survival benefit paid in 10th policy year12th year14th year16th year18th year
14 years 30% of Basic SA 30% of Basic SA      
16 years   35% of Basic SA 35% of Basic SA    
18 years     40% of Basic SA 40% of Basic SA  
20 years       45% of Basic SA 45% of Basic SA

6. Maturity benefit:

On policy maturity, the remaining basic sum assured value + Guaranteed benefit and loyalty additions are paid.

Policy term Maturity benefit paid in 15th year17th yr19th yr21st yr
14 years 40% of Basic SA+ GA+LA      
16 years   30% of Basic SA+ GA+LA    
18 years     20% of Basic SA+ GA+LA  
20 years       10% of Basic SA+ GA+LA
 

7. Conclusion:

As the minimum sum assured value for the new money back plan is kept at Rs. 10 lakh, it turns out to be a high cost plan. For a 30 year male, the annual premium is computed to be Rs 70,266. So it's primarily targeted at HNIs

It is to be also factored in that the guaranteed addition feature which LIC's sale force would use for enticing customers is not paid out immediately and instead is paid on policy maturity or death claim.

Loyalty additions accrue only after first 5 policy years and are not paid in an instance when the assured dies during the first 5 policy years.

Considering all this and the return of 5%-6% from the plan over a policy term of 14-20 years, HNIs who hold the view that their life cover is inadequate can surely bet on the product. But do note, you need to chalk out your investment goals at first as in case if you just need to enhance your sum assured value, you will be better off buying a plain term insurance plan.

 

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