The Hindu Business Line : LIC's Bima Bachat

Close on the heels of SBI Life launching such a product a few weeks ago, LIC has unveiled its single-premium money back offering called Bima Bachat. A look at some of the key features of this policy.

Plan details

The policy involves the payment of a single premium at the outset and the proceeds are staggered over the term of the plan. There are three policy terms available: Nine , 12 and 15 years. The payouts under each plan term are:

Nine-year duration: 15 per cent of the sum assured each at the end of the third and the sixth policy year.

12-year term: 15 per cent of the sum assured each at the end of the third, sixth and ninth policy year.

15-year tenure: 15 per cent of the sum assured each at the end of the third, sixth, ninth and twelfth policy year.

On survival up to the policy's maturity, the policyholder will receive the single premium paid at the time of buying the policy plus loyalty additions, if any.

If the policyholder dies during the currency of the plan, the beneficiary would receive the assured sum. This amount will be paid irrespective of the earlier payouts made under the plan.

To illustrate, if the policyholder dies in the tenth year of a 12-year plan, the sum assured would be paid to the beneficiary, which is over and above the 45 per cent of the sum assured already disbursed.

Surrender value

The plan acquires a surrender value after the completion of one policy year. The value is 90 per cent of the single premium paid.

In the event of surrender before two policy years are completed, the tax benefit of the investment would stand nullified.

Other features

A loan can be taken against this policy at a rate determined by the corporation. The current rate charged is 9 per cent per annum, payable half yearly.

The plan also offers rebates that are linked to the sum assured; opting for an assured sum of Rs 2 lakh and above will entitle the policyholder to the highest rebate of 8 per cent of tabular premium.

Tax benefit

Those looking at investment in insurance as a tax shelter may not find such a plan attractive, as the benefit is available only to the extent of 20 per cent of the sum assured.

In such a case, you may want to consider other plans that permit you to set off the entire premium amount paid from your tax liability.

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