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Will the LIC AmritBaal Plan help you secure your child’s future?
Would investing in LIC’s AmritBaal plan be beneficial in realizing your child’s dream?
Long-term goals related to your children typically include planning for their college education, which requires a significant amount of money. You’re aware that you’ll need a substantial corpus by the time your child reaches college age, usually around 17 or 18 years old.
Starting to save early can make it easier to achieve this financial goal.
In this article, let us thoroughly review and analyse LIC AmritBaal Plan’s Advantages (Pros) and Disadvantages (Cons) in detail to help you make informed decisions regarding your child’s future financial needs.
This detailed Research Study will also guide you on how to become a proactive parent and investor who is keen on fulfilling your child’s financial needs to help them progress toward a brighter future.
Table of Contents
1.)What is the LIC AmritBaal Plan?
2.)What are the Features of the LIC AmritBaal Plan?
3.)What are the Eligibility Criteria for the LIC AmritBaal Plan?
4.)LIC AmritBaal Plan Benefits in Detail
- Death Benefit
- Maturity Benefit
- Guaranteed Additions
5.)LIC AmritBaal Plan Grace Period, Paid-up Value, and Revival
6.)LIC AmritBaal Plan Free-Look Period
7.)Surrendering LIC AmritBaal Plan
8.)What are the Advantages of the LIC AmritBaal Plan?
9.)What are the Disadvantages of the LIC AmritBaal Plan?
10.)LIC AmritBaal Plan Research Methodology
- LIC AmritBaal Plan Benefit Illustration – IRR Analysis
11.)LIC AmritBaal Benefit Plan VS Other Investments
- LIC AmritBaal Plan VS ELSS Fund
- LIC AmritBaal Plan VS LIC’s New Children’s Money Back Plan
- LIC AmritBaal Plan VS LIC New Endowment Plus
12.)Final Verdict on LIC AmritBaal Plan
1.)What is LIC AmritBaal Plan?
LIC AmritBaal is an Individual, Non-Linked, Non-Participating, Savings, Life Insurance plan. The plan aims to provide you with sufficient corpus to meet the higher education and other financial needs of your child. The Guaranteed Addition Benefit can help investors achieve their desired corpus.
2.)What are the Features of the LIC AmritBaal Plan?
- Option to choose Life Insurance coverage for your child as per the needs.
- Flexibility to Choose from Single Premium and Limited Premium Payment.
- Guaranteed Addition ₹ 80 per thousand Basic Sum Assured throughout the Policy Term.
- You have the option to Choose the maturity age from 18 to 25 years
- Premium Waiver Benefit Rider on payment of additional premium.
3.)What are the Eligibility Criteria for the LIC AmritBaal Plan?
| Minimum | Maximum | |
| Age at Entry | 30 days | 13 years |
| Age at Maturity | 18 years | 25 years |
| Policy Term | Limited Premium: 10 years Single Premium: 5 years |
Limited Premium: 25 years Single Premium: 25 years |
| Premium Payment | Limited Premium: 5,6 and 7 years Single Premium: Single pay |
|
| Sum Assured | ₹ 2 Lakhs | No limit |
4.)LIC AmritBaal Plan Benefits in Detail
Death Benefit
The sum of “Sum Assured on Death” plus Accrued Guaranteed Additions can be claimed by the nominee as a Death Benefit.
The “Sum Assured on Death” shall be as per the Option selected as detailed in the Table below.
The death benefit under Limited Premium payment (Option I and Option II) shall not be less than 105% of “Total Premiums Paid” up to the date of death
The policyholder has the convenience of choosing “Sum Assured on Death” based on the two options available under each Single Premium and Limited Premium payment.
| Premium Payment | Option | Sum Assured on death |
| Limited Premium Payment | Option I | Higher of: 7 times of Annualised premium or Basic Sum Assured |
| Option II | Higher of: 10 times of Annualised premium or Basic Sum Assured |
|
| Single premium Payment | Option III | Higher of: 1.25 times of Annualised premium or Basic Sum Assured |
| Option IV | 10 times of Single premium |
Maturity Benefit
“Sum Assured on Maturity” along with Accrued Guaranteed Additions for in-force policy, shall be payable; where “Sum Assured on Maturity” is equal to the Basic Sum Assured.
Guaranteed Additions
It shall accrue at the rate of ₹ 80 per thousand Basic Sum Assured at the end of each policy year from the inception till the end of the Policy Term.
5.)LIC AmritBaal Plan Grace Period, Paid-up Value, and Revival
Grace period (Applicable in case of Option I and Option II only):
A grace period of 30 days shall be permitted for yearly or half yearly or quarterly payment modes and is reduced to 15 days for monthly premiums mode starting from the date of 1st Unpaid Premium.
Paid-up value (Applicable in case of Option I and Option II only):
If the premium for the first two years is not fully paid in respect of this policy and fails to pay any subsequent premium, then benefits under this plan shall cease after the expiry of the grace period from the date of the First Unpaid Premium and nothing shall be payable.
In case the investor pays the premium for the first two years and fails to pay any upcoming premium then this policy shall continue but shall be reduced to a paid-up policy for the entire policy term.
Revival:
A lapsed policy can be revived, within 5 consecutive years from the date of the First Unpaid Premium and before the Date of Maturity, as the case may be.
6.)LIC AmritBaal Plan Free-Look Period
If the Policyholder disagrees with any of the “Terms and Conditions” of the policy, the policy may be returned to the Corporation within 30 days from policy inception. The receipt can be passed either in electronic or physical mode of the Policy Document, whichever seems convenient.
To help you gain more insights into the Policy’s working nature and other such things you can refer to the LIC AmritBaal Plan Policy Brochure
7.)Surrendering LIC AmritBaal Plan
Under Limited Premium payment (Option I and Option II), the policy can be surrendered by the policyholder at any time during the policy term provided at least two full years’ premiums have been paid.
Under Single Premium payment (Option III and Option IV), the policy can be surrendered by the policyholder at any time during the policy term.
8.)What are the Advantages of the LIC AmritBaal Plan?
- Riders can be added to the base policy.
- Option to receive Maturity Benefit / Death Benefit in installments over 5 or 10 or 15 years instead of lumpsum amount.
- The Benefit of an attractive High Sum Assured Rebate.
- Takes care of liquidity needs through loan facility.
9.)What are the Disadvantages of the LIC AmritBaal Plan?
- In general, children’s education plan, offers life cover protection for the parent. Here under this plan, the life insured is the child.
10.)LIC AmritBaal Plan Research Methodology
LIC AmritBaal allows you to save for your children’s education through single premium payment or limited premium payment. Here the policyholder is entitled to guaranteed benefits as well.
Let us work out the Internal Rate of Return (IRR) using the figures in the policy brochure. This will help you in comparing the resulting rate of return with other investment returns.
LIC AmritBaal Plan Benefit Illustration – IRR Analysis
A parent of a 5-year-old child opts for LIC’s AmritBaal – Plan option I. The Sum Assured is ₹ 5 Lakhs. The Policy Term is 20 Years and the Premium Paying Term is 7 years. The child is eligible for a maturity benefit at the age of 25 years. The annualised premium is ₹ 73,625.
| Age | 5 years |
| Sum Assured | ₹ 5 Lakhs |
| Policy Term | 20 years |
| Premium Paying Term | 7 years |
| Annualised Premium | 73,625 |
| Age | Year | Annualised Premium / Maturity Benefit | Death Benefit |
| 5 | 1 | -73,625 | 5,00,000 |
| 6 | 2 | -73,625 | 5,00,000 |
| 7 | 3 | -73,625 | 5,00,000 |
| 8 | 4 | -73,625 | 5,00,000 |
| 9 | 5 | -73,625 | 5,00,000 |
| 10 | 6 | -73,625 | 5,00,000 |
| 11 | 7 | -73,625 | 5,00,000 |
| 12 | 8 | 0 | 5,00,000 |
| 13 | 9 | 0 | 5,00,000 |
| 14 | 10 | 0 | 5,00,000 |
| 15 | 11 | 0 | 5,00,000 |
| 16 | 12 | 0 | 5,00,000 |
| 17 | 13 | 0 | 5,00,000 |
| 18 | 14 | 0 | 5,00,000 |
| 19 | 15 | 0 | 5,00,000 |
| 20 | 16 | 0 | 5,00,000 |
| 21 | 17 | 0 | 5,00,000 |
| 22 | 18 | 0 | 5,00,000 |
| 23 | 19 | 0 | 5,00,000 |
| 24 | 20 | 0 | 5,00,000 |
| 25 | 13,00,000 | ||
| IRR | 5.56% |
If he pays the premium for 7 years, then he is eligible for maturity benefit at the end of the policy term. Including the guaranteed additions ₹ 13 lakh is receivable as maturity benefit. The IRR for this cash flow is 5.56%. Though the benefits are guaranteed, the returns are not favourable to achieving your child’s dream.
The rate of inflation in education is hovering around 11% – 12%, implying that education costs could double every six to seven years. So, investing in the AmritBaal plan will not help you achieve the required corpus for the goal.
11.)LIC AmritBaal Plan VS Other Investments
Comparing with other investment options helps you in choosing the suitable investment avenue. The IRR analysis revealed that you will fall short of the required corpus if you invest via the LIC AmritBaal Plan.
So, let us look at the other investment avenues where we can effectively channelise the same premium.
i) LIC AmritBaal Plan VS ELSS Fund
With LIC AmritBaal, you receive life protection for your child along with Maturity Benefits. In personal finance, having life cover is crucial for the earning member of a family.
However, in this scenario, the child is the primary policyholder, which is unnecessary. The premium paid for life cover in this case serves no practical purpose.
So, let us assume the full premium is invested in the child’s future. Here we have chosen the ELSS fund as the investment vehicle. Based on your risk tolerance level, you can pick an investment vehicle. For 7 years, ₹ 73,625 is invested in the ELSS fund.
| Age | Year | ELSS |
| 5 | 1 | -73,625 |
| 6 | 2 | -73,625 |
| 7 | 3 | -73,625 |
| 8 | 4 | -73,625 |
| 9 | 5 | -73,625 |
| 10 | 6 | -73,625 |
| 11 | 7 | -73,625 |
| 12 | 8 | 0 |
| 13 | 9 | 0 |
| 14 | 10 | 0 |
| 15 | 11 | 0 |
| 16 | 12 | 0 |
| 17 | 13 | 0 |
| 18 | 14 | 0 |
| 19 | 15 | 0 |
| 20 | 16 | 0 |
| 21 | 17 | 0 |
| 22 | 18 | 0 |
| 23 | 19 | 0 |
| 24 | 20 | 0 |
| 25 | 33,28,685 | |
| IRR | 11.44% |
At the time of redemption, capital gains tax is payable. The tax calculation is given below. The pre-tax value amounts to ₹ 36.30 Lakhs. The post-tax maturity value is ₹ 33.28 Lakhs and the IRR calculation results in 11.44% (post-tax return).
| ELSS Tax Calculation | |
| Maturity value after 20 years | 36,30,164 |
| Purchase price | 5,15,375 |
| Long-Term Capital Gains | 31,14,789 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 30,14,789 |
| Tax paid on LTCG | 3,01,479 |
| Maturity value after tax | 33,28,685 |
To cope up with soaring education inflation, always channel your savings toward an appropriate investment. So that, your child’s dream can be achieved without any roadblocks.
ii) LIC AmritBaal Plan VS LIC’s New Children’s Money Back Plan.
Could LIC’s New Children’s Money Back Plan be an ideal plan to invest in a child’s future? Let’s understand what this plan offers to investors.
- It enables the child to access life cover during the policy term.
- Premium Paying Term and Policy Term varies according to the kid’s Age at Entry.
- Maturity Benefit is payable after children have attained the age of 25 years.
To know whether this plan is a good prospect for your kid’s future or not we recommend you to read our article on:’
LIC’s New Children’s Money Back Plan(932) Review – Should You Invest?
iii) LIC AmritBaal Plan VS LIC New Endowment Plus
Will this LIC New Endowment Plus be an appropriate investment product by providing you with adequate life cover and Maturity Benefit? Let’s find out.
- Flexibility to choose Premium Paying Mode and Frequency.
- Out of 4 funds select the fund based on your risk profile.
For further insights about the plan you can refer to our blog post on:
LIC New Endowment Plus Review – Should You Invest?
12.)Final Verdict on LIC AmritBaal
AmritBaal is designed to meet the goals related to your kids. You pay a premium for a limited period and receive the maturity benefit at the scheduled age of 25 years.
The maturity benefit is guaranteed, but there might be a mismatch between the requirement and the actual maturity. The low return on investment and High Agent Commission make it not convincing for investors to invest in this plan.
Moreover, as discussed earlier, the life protection under LIC AmritBaal is of no use. So, both Maturity Benefits and life cover protection are not favourable for an investor. This shows that a children-education plan with guaranteed benefits is just an illusion.
These illusions make you feel that investing in these plans will be a one-stop solution for all your future financial needs. But the reality is not the same.
To meet the skyrocketing education cost, invest in an inflation-beating return instrument. This will accelerate your investment growth. Accomplishing your goal is made easy by choosing the right investment product.
Don’t fall trapped in the ready-made child education plans especially well promoted by Social Media Channels like Facebook, Quora, Twitter, etc. If you need any guidance in building your investment portfolio, then consult a financial advisor.
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