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Sowmya Sundar

LIC's new Bima Nivesh Triple Cover is an attractive investment-oriented insurance product. The main attraction is in the term of the policy and the guaranteed additions.

How it works?

Bima Nivesh is a single premium policy for 10 years. At the end of the term, the sum assured along with the guaranteed compounded additions at the rate of Rs 60 per Rs 1,000 sum assured (SA) is paid with loyalty additions, if any. The yield to maturity works out to 6.5 per cent. The policy is eligible for a rebate under Section 88. The rebate is revoked if the policy is surrendered within three years. The policy has a lock-in period of one year, after which it acquires a surrender value.

If the policy is surrendered after six year, the yield to maturity works out to 5.2 per cent. Investors, who avail tax rebates, will get a yield of 8.1 per cent if they surrender the policy at the end of the sixth year.

If the insuree dies during the policy term, three times the basic SA is paid as death benefit. Guaranteed additions and loyalty additions are not paid along with the death benefit.

Loans

The policy is not eligible for a loan. But it can be used as a collateral with banks.

Premium rebates

The policy is entitled to a rebate of 1 per cent on the premiums for a SA of Rs 25,000 and above, 1.5 per cent for a SA in excess of Rs 50,000 and 2 per cent above Rs 2 lakh.

Suitability

Bima Nivesh is one of the attractive fixed income investment options available. Other options, such as small saving schemes, offer a lower after-tax return and are also available only for a shorter term of five-eight years. Given the prospect of stable interest rates, high-return long-term products such as Bima Nivesh appear attractive. The plan can be considered if your incomes are subject to the highest tax rate and you have exhausted the limits for small savings schemes.

This is because for such an investor the after-tax yields on Bima Nivesh are probably the highest when compared to alternative investment options.

The plan is attractive for people in the above 45 age-group looking for an additional cover. Premium for the plan is one time and flat across all age-groups at Rs 961 per Rs 1,000 SA.

If you are looking at a tax-free investment with attractive returns, this is worth a dekko.

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