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Sowmya Sundar

LIC's Bima Nivesh — discontinued in March — has been re-launched in a new avatar. Though it continues to be a single-premium policy, considerable changes have been made in such features as guaranteed additions, death and survival benefit and the policy term.

This plan now offers the flexibility of a five- or 10-year term instead of the 10 years earlier. The assured returns now stand reduced to Rs 40 or Rs 45 per 1,000 sum assured for a five- and 10 year term, respectively, from Rs 60 in the earlier version. The guaranteed additions accumulate annually on a compounded basis. You can also opt for an additional term assurance rider on payment of an extra premium. It is one-time payment for the rider premium too.

Benefits

On maturity, the sum assured along with accumulated bonuses and loyalty additions are paid out. On death, only the sum assured and the assured returns are paid, not the Loyalty additions .

Guaranteed surrender value

A policy may be surrendered after it has completed at least one year from the date of commencement.

For a policy with a term of five years, the guaranteed surrender value is 90 per cent of the single premium paid excluding any extra premium.

For a 10-year policy, the guaranteed surrender value is 80 per cent of the single premium paid excluding any extra premium.

Loans

You can take a loan on the plan. The loan amount is a function of the plan's surrender value.

Suitability

The plan works like a normal endowment plan, but the assured returns offered differentiates it from other similar plans.

At the assured return, the pre-tax yield works out to 4 per cent and 4.5 per cent respectively for five- and 10-year terms. Even after taking tax concessions, the maximum return works out to 6.3 per cent.

Many small-savings schemes offer better returns and, hence, from an investment perspective, the plan is not superior to small saving schemes.

Moreover, being a single-premium policy, the income on withdrawal is taxed reducing the net post-tax yield. If you are looking for an insurance-cum-savings product, a regular premium endowment plan would be a superior choice.

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