LIC has recently launched 2 new plans Bima Account1 and Bima account 2. Although these plans comes from the house of most trusted name in Indian Insurance "Life Insurance Corporation (LIC)" of India. Although I believed that I know a lot about Insurance I completely failed to understand both the products. Details of the plans are under but please go through Synopsis once you read about product details.
Synopsis
- Although there is guaranteed returns of 6%, but if you go through the product initial as well as recurring charges account for more than 6% inclusive of service tax. So is this product going to give us any return? Yes it might be, but its not at all guaranteed.
- Benefit illustration on LIC website shows accumulated value at Rs. 78249 against the Rs. 75000 total premium paid. Simple, after paying 5 installments in the span of 5 years you would be getting returns like peanuts. And remember, dont expect any wonders after that as your money is not invested in equities.
- Benefit illustration show returns @ 6% and 10% the way its shown in ULIP's but I wonder where my money will be invested and how I can question the fund performance.
- This product is not at all transparent and I wonder why one will pay recurring charges of more than 65 to get guaranteed returns of 6%
- The only where you can get higher yield is that of 3.5% + guaranteed yield is Topups- where you would earn 6% on investment minus topup charges of 2.5%.
- I feel a bank FD is more simple, transparent and safe offering much higher returns. If at all tax saving is the objective, better go for 5 years tax savings fixed deposit.
- These kind of policies will not add any value to your investments but I wonder what tools agents will use to sell this product. LIC is misusing the trust and faith people have due to the Government Backed factor. That too this product has been launched at a time when Insurance sells like a hot cake due to Financial year closing.
- Overall- Useless product- Don't buy
LIC Bima Account1, (Table No. 805) the premiums paid by you, after deduction of charges, will be credited to the the Bima Account.
Policyholder’s Account will consist of 2 parts:
Bima account Regular Premium Account
Top-up Premium Account
Your regular premiums will be credited in your regular account and if you top up your account it will be credited to your top up account.
Loan
Loan facility will be available immediately after first policy anniversary.
6% guaranteed Interest:
Bima Account will earn an annual interest of 6% p.a. provided the policy is in force and 5% p.a. if the policy is paid-up. These interest is guaranteed for whole policy term. In addition to this guaranteed return, if all due premiums are paid, your account may earn an additional return depending upon the experience under Bima account plan.
Benefits:
Benefits payable on death:
In case of death of the Life Assured during the policy term, when the policy is inforce, the nominee will get the Sum Assured along with the balance in the Policyholder’s Account.
Benefits payable on maturity:
On life assured surviving the date of maturity an amount equal to balance in the Bima Account is payable.
Eligibility conditions and terms of Bima account 1:
Minimum Entry Age: 11 (completed)
Maximum Entry Age: 50 (nearest birthday)
Policy Term: 5 to 7
Minimum Maturity Age: 18 (completed)
Maximum Maturity Age: 57 (nearest birthday)
Minimum Premium:
Yearly Rs.7,000
Half-yearly Rs.4,000
Quarterly Rs.2,000
Monthly (ECS) Rs. 600
Top-up premium: Rs.1000
Minimum Sum Assured: 10 times the annualized premium.
Maximum Sum Assured:20 times of the annualized premium up to age 35 years
14 times of the annualized premium for age between 36 to 45years
10 times of the annualized premium for age between 46 to 50 years
Regular premium charges:
Expenses charge (including commission)
First Year 2nd & 3rd Years Thereafter
27.5% 7.5% 5%
Expense charge for top-up Premium: 2.5%
LIC Bima Account 2 Summary:
LIC Bima Account 2 (Plan No. 806) is similar to Bima account 1. Bima account is a without profit Variable Insurance Product wherein the proposals will be accepted under Non-medical Scheme only. Under this plan there will be a Policyholder’s Account maintained separately for individual policyholder, which shall consist of two parts;
Policyholder’s Regular Premium Account and
Policyholder’s Top-up Premium Account.
LIC Bima Account 2 at glance:
An Endowment Plan with guaranteed return
Premium Top up facility
A plan with Guaranteed Interest of 6% for Whole Term
A very high Risk cover
Medium Term policy (10-15 years)
Loan Available after 1 Year : 60% of amount in Policyholder’s account
Surrender Available after 1 year but money will be given after 3 years
No Surrender Charges
Benefits:
a) Benefits payable on death:
Sum Assured along with the balance in the Policyholder’s Account.
b) Benefits payable on maturity:
an amount equal to balance in the Policyholder’s Account is payable.
c) Guaranteed Interest:
Guaranteed interest rate shall be applicable on Policyholder’s Account and not on the gross premium paid by the Policyholder.
The Policyholder’s Account i.e both Policyholder’s Regular Premium Account and Policyholder’s Top-up Premium Account will earn an annual interest of 6% p.a. provided the policy is inforce and 5% p.a. if the policy is paid-up. The interest rates will be guaranteed for the whole of the policy term.
During the revival period Policyholder’s Account will earn guaranteed interest rate of 5% p.a.
On revival of policy, the guaranteed rate of interest on Policyholder’s Account will again be 6% p.a. from the date of revival.
The interest amount will be calculated on day to day basis on balance in the Policyholder’s Account after deduction of all due charges and shall be credited to the Policyholder’s Account at the end of each calendar month.
d) Additional Interest:
The Corporation may also declare an additional interest rate on Policyholder’s Regular Premium Account for inforce policies based on the experience under this plan.
ELIGIBILITY CONDITIONS AND FEATURES of Bima Account 2:
(a) Minimum Sum Assured:
10 times the annualized premium
(b) Maximum Sum Assured:
30 times the annualized premium up to age 35 years
20 times the annualized premium for age between 36 to 45years
10 times the annualized premium for age between 46 to 60 years
(c) Minimum Premium:
Yearly Rs.15,000
Half-yearly Rs.8,000
Quarterly Rs.4,000
Monthly (ECS) Rs.1,250
Top-up premium: Rs.1,000
(d) Maximum Premium: No Limit
Top-up premium: Sum total of Regular Premiums paid upto the date of payment of top-up.
(e) Minimum Entry Age : 8 (completed)
(f) Maximum Entry Age : 60 (nearest Birthday)
(g) Policy Term : 10 to 15
(h) Minimum Maturity Age : 18 (completed)
(i) Maximum Maturity Age : 70 (nearest Birthday)
Age at entry is to be taken as age nearest birthday except for the minimum age at entry.
Charges:
First Year 27.5%
2nd year 7.5% &
3rd Years Thereafter: 5%
Top-up Premium: 2.5%
