Over time, your financial circumstances and objectives can change. You need to ensure that your financial plan remains on track and adapt it to better suit your current and future needs. It’s essential to assess your insurance policy to ensure that it aligns with your financial goals and provides adequate protection.
In this article let us review LIC’s Bima Jyoti plan. In this review, we will analyze the pros(advantages) and cons(disadvantages) of this plan. we will also evaluate the performance of the policy’s investment component and find out whether this LIC Bima Jyoti is a Good or Bad option for your future.
Let’s get started!
Table of Contents
1.)An overview of LIC Bima Jyoti
2.)Features of LIC Bima Jyoti – Analysis
3.)Eligibility Criteria Of LIC Bima Jyoti – Analysis With Illustration
4.)Review Of Benefits in detail under LIC Bima Jyoti
5.)The Grace Period, Reduced Paid-up, and Revival Of LIC Bima Jyoti – Analysis
6.)Free Look Period Of LIC Bima Jyoti
7.)Surrendering LIC Bima Jyoti an Analysis
8.)Advantage of LIC Bima Jyoti – Review
9.)Disadvantage of LIC Bima Jyoti – Review
10.)Research Methodology Of LIC Bima Jyoti – Review
11.)Benefit illustration -– IRR (Internal Rate of Return i.e. Interest Rate) analysis Of LIC Bima Jyoti
12.)LIC Bima Jyoti Vs. Pure term + PPF / ELSS – Analysis
- LIC Dhan Varsha vs. LIC Bima Jyoti – Analysis
- LIC Jeevan Lakshya vs. LIC Bima Jyoti – Analysis
1.) An overview of LIC Bima Jyoti
LIC’s Bima Jyoti is a Non-Linked, Non-Participating, Individual, Life Assurance Savings Plan.
LIC Bima Jyoti provides an attractive mix of savings and protection. In the tragic event that a policyholder passes away during the period of the policy, this plan offers financial help to their family and guaranteed lump sum payment to the surviving policyholder at the time of maturity.
You can find the official brochure of LIC Bhim Jyoti here, for more Policy Details.
2.) Features of LIC Bima Jyoti – Analysis
- In LIC Bima Jyoti, Premiums can be paid regularly at yearly, half-yearly, quarterly, or monthly intervals.
- The benefits you receive are guaranteed provided you pay the premium without any default.
- You have the option to enhance the life cover through five additional riders.
- Tax Benefit is available.
3.) Eligibility Criteria Of LIC Bima Jyoti – Analysis With Illustration
|Age at entry||90 days||60 years|
|Age at maturity||18 years||65 / 75 years|
|Basic Sum Assured||1,00,000||No Limit|
|Policy Term||15 to 20 years|
|Premium Paying Term||Policy Term minus 5 years|
4.) Review Of Benefits in detail under LIC Bima Jyoti
Death Benefit – Review
If the death happens, during the LIC Bima Jyoti Policy Term and before the date of commencement of risk, then the Return of LIC Bima Jyoti premiums paid excluding taxes, extra premium, and rider premium(s), if any.
If the death happens during the LIC Bima Jyoti Policy Term and after the date of commencement of risk, then
“Sum Assured on Death” and Accrued Guaranteed Additions. Where “Sum Assured on Death” is defined as a higher of
- 125% of the Basic Sum Assured or
- 7 times of annualised premium of LIC Bima Jyoti
- Death Benefit shall not be less than 105% of the total Premiums paid up to the date of death.
Maturity Benefit – Analysis
On Life Assured surviving the stipulated Date of Maturity provided the LIC Bima Jyoti policy is in force, “Sum Assured on Maturity” along with Guaranteed Additions, shall be payable. Where “Sum Assured on Maturity” is equal to Basic Sum Assured.
Guaranteed Additions – Analysis
In LIC Bima Jyoti, Guaranteed Additions at the rate of Rs. 50 per thousand Basic Sum Assured will be added to the policy at the end of each policy year.
5.) The Grace Period, Reduced Paid-up, and Revival Of LIC Bima Jyoti – Analysis
For payments of yearly, half-yearly, or monthly fees, a grace period of 30 days shall be permitted, and 15 days for monthly premiums from the date of the First Unpaid Premium
If less than two full years’ premiums have been paid in respect of this LIC Bima Jyoti policy and any subsequent premium is not duly paid, After the grace period from the date of the first unpaid premium expires, LIC Bima Jyoti insurance will terminate all the benefits and nothing will be payable.
If, after at least two full years’ premiums have been paid and any subsequent premiums are not duly paid, this LIC Bima Jyoti policy shall not be wholly void but shall subsist as a paid-up policy till the end of the Policy Term.
A lapsed LIC Bima Jyoti policy can be revived, but within a period of 5 consecutive years from the date of the First Unpaid Premium but before the date of maturity.
6.) Free Look Period Of LIC Bima Jyoti
If the LIC Bima Jyoti Policyholder is not satisfied with the “Terms and Conditions” of the policy, the LIC Bima Jyoti policy may be returned to the Corporation within 15 days (30 days in case of electronic policies and policies obtained through distance mode (online)) from the date of receipt of the LIC Bima Jyoti policy bond.
7.) Surrendering LIC Bima Jyoti an Analysis
The LIC Bima Jyoti policy can be surrendered at any time provided two full years’ premiums have been paid. On surrender of the LIC Bima Jyoti policy, the Corporation shall pay the Surrender Value equal to the higher Guaranteed Surrender Value or Special Surrender Value.
8.) Advantage of LIC Bima Jyoti – Review
- Option to receive Maturity Benefit in installments over the chosen period of 5 10 or 15 years under the Settlement option.
- The loan can be availed under the LIC Bima Jyoti policy provided at least two full years’ premiums have been paid. The maximum loan amount is 90% of the surrender value.
- Option to receive Death Benefit in instalments over the chosen period of 5 10 or 15 years instead of a lump sum amount.
9.) Disadvantages of LIC Bima Jyoti – Review
- The lock-in period is 2 years.
- The Sum Assured is low.
- Though the returns are guaranteed, the returns are not satisfactory.
10.) Research Methodology Of LIC Bima Jyoti – Review
So far, we discussed the features and benefits. Now let us delve deep into the interest calculation. LIC Bima Jyoti is an endowment plan and it is neither linked to market returns nor it participates in the profit. You pay a premium for a limited period and you receive the Maturity Benefit along with Guaranteed Additions at the end of LIC Bima Jyoti Policy Term.
Premium Payment without any default assures you of the benefits. As the cash outflow and inflow are known, it is easy to calculate the return on investment. First, we shall calculate the internal rate of return for the LIC Bima Jyoti policy and then compare it with other investment avenues.
11.) Benefit illustration – IRR (Internal Rate of Return i.e. Interest Rate) analysis Of LIC Bima Jyoti
|Basic Sum Assured||10,00,000|
|Sum Assured on Death||12,50,000|
|Policy Term||20 years|
|Premium Paying Term||15 years|
A 35-year-old male buys LIC Bima Jyoti for a Sum Assured of ₹ 10 lakhs. The LIC Bima Jyoti Policy Term is 20 years and the Premium Paying Term is 15 years. The annualized premium is ₹ 78,770. He is entitled to a Maturity Benefit at the end of 20 years.
|Age||Year||LIC Bima Jyoti|
|Annualized premium / Maturity Benefit||Death benefit|
In the above illustration, the IRR is calculated at 4.02%.
In this illustration, he receives ₹ 20 Lakhs as a Maturity Benefit. The IRR(Internal Rate of Return i.e. Interest Rate) works out to be 4.02%. Your funds get locked for a longer period, but the returns are not up to the mark. This is a long-term investment and the yield is similar to debt instrument return. This affects your wealth accumulation process.
12.) LIC Bima Jyoti vs. Other Investment Products
The benefits received from LIC Bima Jyoti are guaranteed. This feature seems lucrative. Yet the returns are displeasing. This makes us look around for other opportunities. While looking for other options, both insurance and investment components should be met. Pure Term Life Insurance and investment in PPF / ELSS will meet both criteria.
|Pure Term Policy|
|Sum Assured on Death||12,50,000|
|Policy Term||20 years|
|Premium Paying Term||10 years|
i) LIC Bima Jyoti Vs. Pure term + PPF / ELSS – Analysis
A Pure Term Policy for a Sum Assured of ₹ 12,50,000 would cost ₹10,800 p.a. The balance amount of ₹ 67,970 is available for investment. Here the Policy Term is 20 years and the Premium Paying Term is 10 years. But in the earlier illustration, the Premium Paying Term is 15 years. This leaves you with the full amount for investment in the next 5 years.
PPF account could be extended for another 5 years to match the Policy Term of 20 years. When you exit from the ELSS fund, Capital Gains Tax applies. Tax calculations are given below.
|Age||Year||Term Insurance + PPF||Term insurance + ELSS|
|Term Insurance premium + PPF||Death benefit||Term Insurance premium + ELSS||Death benefit|
In the above illustration, the IRR for Term Insurance premium + PPF is 6.26% and the IRR of Term Insurance + ELSS is calculated at 10.50%.
ELSS Tax calculation
|Maturity value after 20 years||51,36,899|
|Long-term capital gains||40,63,349|
|Tax paid on LTCG||3,96,335|
|Maturity value after tax||47,40,564|
In the above illustration, the Maturity Value after Tax is calculated at 47,40,564.
The final Maturity Value under the PPF account is ₹ 26.91 lakhs. Pure Term Insurance Policy with PPF investment yields you 6.26%.
The Final Maturity Value under the ELSS fund is ₹ 51.36 lakhs. This is the Pre-Tax Value. After the Capital Gains Tax payment, leaves you with ₹ 47.40 lakhs. Pure Term Insurance Policy with ELSS investment yields you 10.50% (Post-Tax Return).
The above calculations depict that Investment for life goals separately yields better returns than traditional endowment plans. Also, the returns are good enough to combat inflation in the long run.
ii) LIC Dhan Varsha vs. LIC Bima Jyoti – Analysis
Please read the complete review of LIC Dhan Varsha here, It is a policy with a single premium. On the unfortunate death of the policyholder within the period of insurance, this plan would offer financial security for your family. Additionally, it offers the surviving life assured a guaranteed lump sum payment on the policy’s maturity date.
iii) LIC Jeevan Lakshya vs. LIC Bima Jyoti – Analysis
Some of the Features of LIC Jeevan Lakshya,
- Life coverage for the whole policy term with a limited premium paying period.
- The premium delivery method can be selected based on convenience.
- As long as the insurance is in effect, it will continue to share in earnings until the date of maturity.
Read the complete review of LIC Jeevan Lakshya here, to compare and analyse it with LIC Bima Jyoti.
13.) LIC Bima Jyoti vs. Other Investment Products – Review Conclusion
First, we analyzed the option of Pure Term Insurance + PPF or ELSS as an alternative for LIC Bima Jyoti and then we compared LIC Bhima Jyoti with other similar insurance plans. It seems clear that taking a Term Insurance plan for security and investing in ELSS or PPF is a better option compared to LIC Bhim Jyoti. Mixing insurance with investments is like having “One foot in the river, one foot in the mud”.
14.) Final verdict on LIC Bima Jyoti – Good or Bad?
LIC Bima Jyoti is a financial product designed to provide both insurance coverage and savings or investment benefits. While analyzing the plan, we couldn’t find any special feature that stood out from other plans. This is a simple endowment plan that provides you with Guaranteed Returns.
The returns are not up to the mark for a long-term investment. The Sum Assured is also inadequate. The insurance and investment component of LIC Bima Jyoti is unworthy. This makes LIC Bima Jyoti ineligible to be in your portfolio. But why are insurance agents keen to push you into this plan? Because of the high agent commission that they get!
Alternatively, always go for Pure Term Life Insurance Policies. Unfortunately, no agents push pure-term products. Avoid Traditional Life Insurance plans which are backed by high agent commissions.
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It is advisable to consult with a financial advisor who can provide personalized guidance based on your specific financial goals and needs. They can help you assess various investment avenues that align with your financial objectives.