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LIC Bima Bachat Single Premium Insurance Plan- AVOID

08 Aug

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.

Goal sheet

  1. You pay single premium for the entire tenure for this insurance plan at one go.
  2. 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.
  3. Assured returns of 15% on Sum Assured every 3 years.
  4. 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.
  5. Maturity amount would be premium paid + loyalty additions (if any).
  6. On death of insured, sum assured is paid to nominee
  7. No riders available in this insurance plan
  8. This is the only insurance plan under money back policy which offers loan on the policy.
  9. 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.

AVOID: 

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

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5 Comments

Posted by on August 8, 2013 in Uncategorized

 

Tags: , ,

5 responses to “LIC Bima Bachat Single Premium Insurance Plan- AVOID

  1. Deepak

    December 21, 2014 at 7:25 am

    Hi Sir,

    I have done some calculation after reading your article and below are the findings for a single premium LIC of amount 4,95,735 SA : 750,000. I could see that in comparison with bank FD @9% rate LIC found to be much better as it covers me for life insurance as well while return is more that a bank FD.

    Please review and let me know if I am missing anything here.

    One time premium paid in 2006 4,95,735 SA : 750000
    Return calculation for bank FD
    Year————FD Deposit———-Maturity yearly
    2006————4,95,735————5,40,351
    2007————5,40,351————5,88,983
    2008————5,88,983————5,29,491—- -1,12,500 (Money Received 15% of SA)
    2009————5,29,491————5,77,145
    2010————5,77,145————6,29,088
    2011————6,29,088————5,73,206—- -1,12,500 (Money Received 15% of SA)
    2012————5,73,206————6,24,795
    2013————6,24,795————6,81,027
    2014————6,81,027————7,42,319
    2015————7,42,319———— NA
    Total % Return in 9 yrs 49.74%
    Total % Return in 1 yrs 5.53%

    Return in LIC Bima Bachat Single Premium Insurance

    Year————Single Premium————4,95,735
    2009————3rd yr. return————1,12,500
    2012————6th yr. return————1,12,500
    2015————9th yr. return————4,95,735
    Total return 7,20,735
    Total % Return in 9 yrs 45.39%
    Total % Return in 1 yrs 5.04%
    *Loyalty addition not added.

    If you add loyalty addition then per annul return will be higher.

    Thanks,
    Deepak

     
    • bestinvestmentidea

      February 1, 2015 at 4:02 pm

      Thanks for the calculation, really appreciate

       
    • Bommuraj

      March 15, 2016 at 9:43 am

      Hi Deepak,
      there is missing FD withdrawal of Rs:225000/-

       
    • Ravi

      June 27, 2016 at 6:49 pm

      Deepkak, As per your calculation you will get extra 246584 compared to LIC… SO FD is much better….. LIC Return 1,12,500 + 1,12, 500 But.. FD 1,12,500 + 1,12, 500 + 2,46, 584

       
  2. Ravi

    June 27, 2016 at 6:48 pm

    Deepkak, As per your calculation you will get extra 246584 compared to LIC… SO FD is much better….. LIC Return 1,12,500 + 1,12, 500 But.. FD 1,12,500 + 1,12, 500 + 2,46, 584

     

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