LIC Bima Bachat Plan

Key Features LIC Bima Bachat

• LIC Bima Bachat is a Single Premium Plan of LIC Endowment & Saving Traditional plans.
• LIC Bima Bachat is a Simple money back plan with the bonus option
• LIC Bima Bachat can be taken for 9 years, 12 years, or 15 years
• Under LIC Bima Bachat, if the Life Insured is alive at the end of every three years, 15% of the Basic Sum Assured is paid as Survival Benefit, and the policy continues.
• Under LIC Bima Bachat, on survival till the end of the policy tenure, the entire Single Premium paid along with Loyalty Addition would be paid to the policyholder as Maturity Benefit, and the policy terminates.
• Under LIC Bima Bachat plan, if the life insured dies within the policy tenure, the entire Sum Assured + Loyalty Addition would be paid to the nominee as Death Benefit. 

Benefits of LIC Bima Bachat

Loyalty addition: LIC Bima Bachat policy declares loyalty addition after the policy has completed a tenure of 5 years.

Survival Benefit: Under LIC Bima Bachat plan, on survival, 15% of the Sum Assured is paid to the policyholder as Survival Benefit, and the policy continues:

For Policy Tenure of 9 years

• Payable at the end of the 3rd Policy Year
• Payable at the end of the 6th Policy Year

For Policy Tenure of 12 years

• Payable at the end of the 3rd Policy Year
• Payable at the end of the 6th Policy Year
• Payable at the end of the 9th Policy Year

For Policy Tenure of 15 years

• Payable at the end of the 3rd Policy Year
• Payable at the end of the 6th Policy Year
• Payable at the end of the 9th Policy Year
• Payable at the end of the 12th Policy Year

Maturity Benefit: Under LIC Bima Bachat, the Single Premium paid + Loyalty Addition would be paid to the policyholder on survival till the end of the policy tenure.

Death Benefit: If the Life Insured dies within the policy tenure under LIC Bima Bachat:

• Only Sum Assured will be paid if the Life Insured dies within the first five policy years of the LIC Bima Bachat plan.
• After completing five years of LIC Bima Bachat, the Sum Assured, and Loyalty Addition, if any, would be paid as Death Benefit.
• There is a high sum assured discount available under the LIC Bima Bachat plan.
• Income tax benefit on the premium paid under LIC Bima Bachat as per Section 80C and the claims received as per Section 10(10D) of the Income Tax Act.

Product Specification:

LIC Bima Bachat Premium Details 

The annual premium is mentioned in Rupees for a Sum Assured of 1 Lac under LIC Bima Bachat plan. Basic Premium is mentioned below (Tax not included).

Policy Details

Grace Period: Not applicable under LIC Bima Bachat as there is no need for further premium payment.

Policy Termination or Surrender Benefit: The Surrender Benefit is available under LIC Bima Bachat plan:

• Within the first year of LIC Bima Bachat: 70% of the Single premium paid excluding taxes and extra premium, if any.
• Under LIC Bima Bachat, from the 2nd year onwards, 90% of the Single premium is paid excluding taxes, extra premium, if any, and all survival benefits paid earlier.

Free Look Period: If you are not pleased with the coverage and terms and conditions of the LIC Bima Bachat policy, you have the option of canceling the LIC Bima Bachat policy within 15 days of receipt of the LIC Bima Bachat policy documents, provided there has been no claim.

Inclusions

The loan is available in LIC Bima Bachat, upto 60% of the surrender value.

Exclusions

Under LIC Bima Bachat, if suicide is committed within 12 months of policy inception, only 90% of the single premium paid is returned to the nominee.

Documents Required

For LIC Bima Bachat policy, the policyholder must fill up an ‘Application form/ proposal form’ with an accurate medical history, address proof, and other KYC documents. A medical examination may be required in some cases, based on the sum assured and the person's age under LIC Bima Bachat.

Advantages of a Money Back Policy

A money-back plan is one of the best types of life insurance policies available in the market. Besides offering insurance and investment, a money-back plan offers guaranteed returns by way of money redemption at regular intervals with a low degree of risk. Such a plan is ideal for people who require money at different stages in their life to meet fixed long and short-term financial needs such as buying a car and house, international vacations, paying for health expenses, school fees, etc.

Unlike traditional endowment plans, where survival benefits are payable only at the end of the endowment period, a money-back plan offers periodic payments of partial survival benefits during the policy's tenure as long as the policyholder is alive. 

Key Advantages of a Money Back Policy:

1. Insurance Cover as well as Investment Returns

   A money-back plan is ideal for risk-averse individuals as it provides them with a life insurance cover in addition to significant guaranteed returns (investment returns). In fact, a money-back plan offers several advantages – maturity benefit, survival benefit, insurance cover, and bonus, resulting in significant overall payouts.

   All other investment plans pale in comparison to the advantages of a money-back plan. Most give returns only at the end of the policy tenure. In contrast, some give returns over the policy's lifetime. Still, none of them match up to the advantages offered by money-back plans. A money-back plan provides insurance cover, regular income, tax benefits, and bonuses.  

2. Helps Plan Course of Life with Regular Payouts

   Every individual has a set of dreams and aspirations for essential stages in life. These can be fulfilled only if one has the required amount of money to make these dreams a reality.

   A money-back plan helps a person chart the course of his or her life with a sum that is expected at regular intervals. With regular income through a money-back plan, one can be sure that the dreams will see the light of the day without compromising one’s day-to-day responsibilities. Whether it is paying for a child’s education, buying a car, or any other necessary expense, it can be executed smoothly with the help of this policy. A money-back plan helps meet intermittent liquidity requirements at essential stages of life.

3. Returns Begin to Accrue After Few Years

   Unlike most insurance products which pay benefits only at the time of maturity of the plan, a money-back insurance plan starts giving returns after a few years of investment.

   In the case of long-term policies, an amount is paid every few years (survival benefit) and the remaining on maturity. This amount totals to a significant amount and can be utilized towards short or long-term purchases.

   The final payout given at the time of maturity with the maturity amount is larger than previous payouts. Survival benefit is paid only if the policyholder is alive. In case of passing away of the insured party, survival benefits do not accrue, and the nominee/beneficiary only receives the sum assured plus any loyalty bonus amount. 

4. Policyholder Receives Full Sum Assured on Maturity

   Under a money-back insurance plan, the policyholder receives the full sum assured amount at the time of maturity, irrespective of the survival benefits received earlier.

   A money-back plan pays more than just the maturity amount. The insured receives periodic survival benefits over the term of the policy. And he/she stands a chance to receive a bonus by way of loyalty addition at the end of the plan period, part of the maturity benefit. 

5. Time Value of Money Higher with a Money Back Policy

   The principle of the time value of money states that the value of money available at present is worth more than the same amount in the future due to its potential earning capacity

   This is why money-back plans score over other kinds of life insurance plans. Survival benefits which are paid periodically over the policy tenure are worth more than if they were paid at the end of the policy term. 

6. Helps Counter Volatility Arising from Market Linked Investments

   The very nature of returns from market-linked investments is unpredictable because of the volatile nature of markets. Money-back plans help safeguard against losses arising from other forms of investment due to the guaranteed nature of its returns.

   It is advisable to have a money-back plan as part of one’s portfolio, even if one relies heavily on market-linked instruments. In addition to definite returns, a money-back plan offers a life insurance cover. The periodic survival benefit amount can be used to take care of expenses at different stages in life or even to make investments. 

7. Bonus at Maturity Increases Overall Payout

   The policyholder receives 2 kinds of bonuses under the money-back plan, which significantly increases the overall payout.

   The first is a reversionary bonus, declared at the end of each year by the life insurance company for its policies and added to the total sum payable to the insured at maturity. The bonus is declared as a percentage of the sum assured and can be of 2 types – simple revisionary bonus and compound revisionary bonus. The compound revisionary bonus for each year is added to the sum assured. It increases the sum assured amount; therefore, the bonus figure for succeeding years is more as the sum assured has increased from the previous year’s amount.

   The second bonus, the final additional bonus, may be given by the insurance company to the policyholder at the end of the policy tenure as a reward for loyalty. 

8. Tax Savings

   The premium paid under money back life insurance policy is entitled to tax deductions under section 80C of the Income Tax Act, up to the specified limit, as long as the insurance premium is less than 10% of the sum assured. This way, one can reduce his/her tax liability with the help of a money-back plan.

   Also, the maturity amount is exempt from tax deduction at source, as long as the sum assured is more than 5 times the premium paid for the policy. 

9. Surrender Clause

   A money-back policy usually has a built-in clause that allows surrendering the policy before the end of the policy term.

   In such cases, the surrender value is calculated based on pre-defined formulae and paid by the insurance company to the policyholder. 

10. Policy Loan

    Some money-back policies offer a loan facility, i.e., a loan can be availed against the policy during the policy term, subject to specific terms and conditions and the production of the satisfactory title.

Comparison of Life Insurance Plans

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