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Nath Balakrishnan

AFTER having a truly competitive product offering in the pure term assurance space, LIC's New Bima Kiran is a modified version of the plain vanilla term plan.

Unlike pure term plans, this policy incorporates survival benefits. All premiums paid by the policyholder will be returned on his survival up to the policy's maturity.

Term plans with a return of premium option appear to be gaining prominence. Apart from LIC, other players that have a similar product include Birla Sun Life, ICICI Prudential, Aviva and Allianz Bajaj.

Such plans essentially appeal to those who find it difficult to reconcile themselves to the notion that no survival benefits are payable on their insurance policy.

Though such plans provide policyholders with a sense of comfort; this one comes at a cost that is far higher than a regular term plan.

How the plan operates

The policyholder is required to pay premiums over the entire plan term. In the event of the insuree dying before the maturity, the sum assured is paid out immediately and the plan terminates.

The policyholder is also entitled to receive a loyalty addition if the policy has been in force for four years and all premium payments have been made.

On survival up to maturity, the policyholder's premium payments will be refunded. There will, however, be no interest component. The policyholder will also be entitled to a loyalty addition.

Additional features

This plan also incorporates an accident benefit feature (which is capped at Rs 5 lakh). Should the policyholder die in an accident, the sum assured under the feature will also be paid out, over and above the basic sum assured. Further, this plan also offers extended risk cover for 10 years after the policy's maturity. The extent of the cover is a certain percentage of the original sum assured, which is determined by the plan duration. For example, if the sum assured under the original policy is Rs 1 lakh and the duration is 20 years, on maturity, extended life cover can be taken at the rate of Rs 400 per Rs 1,000 sum assured. Hence, the extent of the cover will be Rs 40,000.

Loans

The policy does not become paid-up, as in the case of endowment plans/money-back plans, after premiums are paid over a particular duration. Hence, no loans can be taken against the policy.

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