LIC Bima Bachat is a money back policy where you will get money back at specific intervals. Lets us discuss some of the salient points of this policy which is just another single premium policy by this big insurance player with largest number of agents.
- You pay single premium for the entire tenure for this insurance plan at one go.
- This Insurance plan is available for 9 years, 12 years and 15 years period. What I mean is term is for 9, 12 and 15 years.
- Assured returns of 15% on Sum Assured every 3 years.
- If you retain the policy till the end of the policy period, loyalty additions if any, (but not guaranteed) would be paid. Loyalty addition is now not there in most of the policies of LIC and there are very less chance that you will get this.
- Maturity amount would be premium paid + loyalty additions (if any).
- On death of insured, sum assured is paid to nominee
- No riders available in this insurance plan
- This is the only insurance plan under money back policy which offers loan on the policy.
- Minimum sum assured is Rs 20,000 and maximum no limit
Understanding the policy
This insurance plan is available in 9 years, 12 years and 15 years tenure period.
- 9 years plan – You would get 15% returns each at the end of 3rd year and at the end of 6th year. After 9th year, at maturity, premium amount is paid back to insured.
- 12 years plan – You would get 15% returns each at the end of 3rd year, at the end of 6th year and at the end of 12th year. After 12th year, at maturity, premium amount is paid back to insured.
- 15 years plan – You would get 15% returns each at the end of 3rd year, at the end of 6th year, at the end of 9th year and at the end of 12th year. After 15th year, at maturity, premium amount is paid back to insured.
Disadvantages are more
- The annualized returns without considering bonus/loyalty additions are low at 5.1%. Even if you consider taking a term insurance plan and investing the amounts in Bank FD or mutual funds or in Post office schemes, we would get better returns
- Without loyalty bonus this policy is good for End of the policy period, if insured is survived, he would just get the amount of premium what he paid.
- This is the only money back insurance plan which offers loan on policy. However the interest rates are 9%+. So LIC would pay you 5.1% returns and charge you 9% if you take loan on this insurance plan, so you are always at a disadvantage with this loan.
- Any returns on insurance plan would be tax free if the premium paid is less than 20% of sum assured. Since the premium paid is more than 65% of sum assured, the returns from such insurance plan is taxable. Post tax, the returns would be almost negligible.
We suggest you better avoid these kinds of policies; there are better options available in the market although this gives you 15% assured returns at the end of every three years.
While taking any insurance plan, people should not think about the returns but to think about the family in the absence of the bread-winner of the family. Hence, there is a need of awareness among the public about the term policies