LIC Bima Jyoti Plan: Amid dwindling interest rates, The Life Insurance Corporation of India(LIC) launches the Bima Jyoti plan that offers guaranteed addition at a charge of Rs. 50 thousand Basic Sum Assured on the finish of every coverage 12 months all through the coverage time period. It is a Non-linked, Non-participating, Individual, Limited Premium Payment, Life Insurance Savings Plan.
Policy Term & PPT
The Policy Term of the plan varies from 15 to 20 years and the Premium Paying Term (PPT) will be 5 years less than the respective Policy terms. That is for a 15-year policy term, the PPT will be 10 years and for a 16-year policy, the PPT will be 11 years, and so on.
Sum Assured Limits
The minimum Basic Sum Assured is Rs 1 lakh and multiples of Rs 25,000 thereafter, with no maximum limit.
Age Limits
The minimum age at entry allowed is 90 days (completed) and the maximum age at entry maybe 60 years (nearer birthday, while the minimum age at maturity will be 18 years (completed) and the maximum age at maturity will be 75 years (nearer birthday).
Return Comparison
While leading banks now offering Fixed Deposit (FD) rates of around 5-6 percent per annum, Rs 50 per thousand Basic Sum Assured guaranteed addition would generate a higher return and that too tax-free, as the calculation will be done on the amount of Basic Sum Assured and not on the amount of premium.
Guaranteed Addition
For example, for a 30-year old individual opting for Rs 10 lakh Basic Sum Assured for a policy term of 15 years, the annual premium – to be paid for 10 years – will be Rs 82,545. In this case, the guaranteed addition will be Rs 50,000 per year for 15 years or Rs 7,50,000 on maturity.
Return Calculation
The total maturity value will be the total guaranteed addition of Rs 7,50,000 plus the Basic Sum Assured of Rs 10,00,000 (Rs 7,50,000+Rs 10,00,000) or Rs 17,50,000. So, the compounded annual return or the Internal Rate of Return (IRR) – with premium payment of Rs 82,545 in the beginning of each year for 10 years and the maturity value of Rs 17,50,000 at the end of 15th year would be 7.215 percent.
