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Are you looking for opportunities to save and invest a part of your income?
Do you expect that this becomes a lumpsum amount over a period?
Will traditional life insurance plans serve the above purpose?
LIC Bima Shree is a plan created especially for high-net-worth individuals. Will this plan be a part of your investment portfolio and help to grow your wealth in the long run?
In this analysis, let us find out how the plan works, and we are going to delve deep into the Advantages(pros) and Disadvantages(cons) of LIC Bima Shree to find out whether it’s a Good or Bad decision to include LIC Bima Shree in your investment portfolio.
Let’s get started!
Table Of Contents
1.)What is LIC Bima Shree?
2.)What are the Features of LIC Bima Shree?
3.)Who is eligible for LIC Bima Shree?
4.)What are the Benefits of LIC Bima Shree? A Systematic Analysis
5.)The Grace Period, Paid-up Policy, and Revival of LIC Bima Shree
6.)Free-Look Period of LIC Bima Shree
7.)When can you Surrender LIC Bima Shree?
8.)What are the advantages of LIC Bima Shree?
9.)What are the disadvantages of LIC Bima Shree?
10.)Research Methodology of LIC Bima Shree
- Benefit Illustration – IRR(Internal rate of return i.e. Interest Rate) Analysis of LIC Bima Shree
11.)LIC Bima Shree vs Other Investment Options
- LIC Bima Shree Vs. Pure Term + ELSS
- LIC Bima Shree Vs. LIC New Money Back Plan (25 years)
- LIC Bima Shree Vs. LIC New Endowment Plus
12.)LIC Bima Shree vs Other Investment Options-Review Conclusion
13.)Final verdict on LIC Bima Shree – Good or Bad Investment Option?
1.)What is LIC Bima Shree?
LIC Bima Shree is a participating individual life assurance savings plan that’s non-linked. In the tragic event that the policyholders pass away during the policy’s term, this plan offers financial help to their families. In addition, the policyholder will receive periodic payments at certain intervals during the policy term if they survive, as well as a lump sum payout upon maturity to the policyholder who survives.
Read the complete details in the LIC Bima Shree policy Brochure.
2.)What are the Features of LIC Bima Shree?
- LIC Bima Shree is a plan created especially for high-net-worth individuals. Policy term – 14, 16, 18 or 20 years.
- Premiums can be paid regularly at yearly, half-yearly, quarterly, or monthly.
3.)Who is eligible for LIC Bima Shree?
| Minimum Age at Entry | 8 years |
| Maximum Age at Entry | Policy term 14 years – 55 years Policy term 16 years – 51 years Policy term 18 years – 45 years Policy term 20 years – 46 years |
| Minimum/ Maximum Maturity Age | Policy term 14 years – 69 years Policy term 16 years – 67 years Policy term 18 years – 66 years Policy term 20 years – 65 years |
| Policy Term | 14, 16, 18 and 20 years |
| Premium Paying Term | (Policy term – 4) years |
| Minimum Basic Sum Assured | Rs. 10,00,000 |
| Maximum Basic Sum Assured | No Limit |
4.)What are the Benefits of LIC Bima Shree? A Systematic Analysis
Death Benefit – Analysis
On death during first five years: Death Benefit defined as the sum of “Sum Assured on Death” and accrued Guaranteed Addition shall be payable.
On death after completion of five LIC Bima Shree policy years but before the date of maturity: Death Benefit defined as the sum of “Sum Assured on Death” and accrued Guaranteed Addition and Loyalty Addition, if any, shall be payable.
Where “Sum Assured on Death” is defined as the higher of
- 125% of the Basic Sum Assured or
- 7 times of annualised premium.
- This Death Benefit shall not be less than 105% of all the premiums paid up to the date of death.
Survival Benefit – Analysis
On the life assured surviving to each of the specified durations during the policy term, a fixed percentage of the Basic Sum Assured shall be payable. The fixed percentage for various LIC Bima Shree policy terms is as below:
| Survival Benefit | Survival Benefit (% of Sum Assured) |
| Policy term 14 years | 30% of the Basic Sum Assured on each of the 10th and 12th policy anniversary |
| Policy term 16 years | 35% of the Basic Sum Assured on each of the 12th and 14th policy anniversary |
| Policy term 18 years | 40% of the Basic Sum Assured on each of the 14th and 16th policy anniversary |
| Policy term 20 years | 45% of the Basic Sum Assured on each of the 16th and 18th policy anniversary |
Maturity Benefit – Analysis
On the life assured surviving to the end of the policy term, provided all due premiums have been paid, “Sum Assured on Maturity” along with accrued Guaranteed Additions and Loyalty Addition, if any, shall be payable.
| Maturity Benefit | Maturity Benefit (% of Sum Assured) |
| Policy term 14 years | 40% |
| Policy term 16 years | 30% |
| Policy term 18 years | 20% |
| Policy term 20 years | 10% |
Participation in profits – Analysis
- Guaranteed Additions
Guaranteed Additions shall accrue at the end of each policy year during the Premium Paying Term (PPT).
Rs. 50 per thousand Basic Sum Assured for the first five LIC Bima Shree Policy years
Rs. 55 per thousand Basic Sum Assured from 6th LIC Bima Shree policy year till the end of PPT
- Loyalty Additions
Provided the LIC Bima Shree policy has completed five policy years and at least 5 full years’ premium have been paid, then this plan shall be eligible for Loyalty Addition at the time of exit in the form of Death during the LIC Bima Shree policy term or Maturity.
5.)The Grace Period, Paid-up Policy, and Revival of LIC Bima Shree
- Grace period
In LIC Bima Shree, a Grace Period of 30 days shall be allowed for payment of yearly half-yearly, or quarterly premiums and 15 days for monthly premiums from the date of the first unpaid premium.
- Paid-up Policy
If less than two years of LIC Bima Shree policy premiums have been paid, and any subsequent premium is not duly paid, all the benefits under the LIC Bima Shree policy shall cease after the expiry of the grace period from the date of the first unpaid premium and nothing shall be payable.
If after at least two full years’ LIC Bima Shree Policy premiums have been paid and any subsequent premiums are not duly paid, the LIC Bima Shree policy shall not be wholly void but shall continue as a paid-up policy till the end of the policy term.
- Revival
A lapsed LIC Bima Shree policy can be revived within 5 consecutive years from the date of the first unpaid premium.
6.)Free-Look Period of LIC Bima Shree
If the LIC Bima Shree Policyholder is not satisfied with the “Terms and Conditions” of the policy, the LIC Bima Shree policy may be returned to the Corporation within 15 days from the date of receipt of the LIC Bima Shree policy bond stating the reasons for objections.
7.)When can you Surrender LIC Bima Shree?
The LIC Bima Shree policy can be surrendered at any time provided two full years’ premiums have been paid. On surrender of the LIC Bima Shree policy, the Corporation shall pay the Surrender Value equal to the higher Guaranteed Surrender Value or Special Surrender Value.
8.)What are the advantages of LIC Bima Shree?
- Guaranteed additions enhance the Maturity Benefit.
- Riders can be added to the base policy.
- Policyholders have the option to defer the Survival Benefit.
- Under the Settlement Option, you can receive the Maturity Benefit in installments over the chosen period of 5 10, or 15 years instead of a lump sum amount.
- Option to take the Death Benefit in installments.
- Rebate for High Sum Assured.
9.)What are the disadvantages of LIC Bima Shree?
- Loyalty additions are non-guaranteed.
- There might be a mismatch in the Survival Benefit and actual requirement.
10.)Research Methodology of LIC Bima Shree – Analysis
So far, we discussed the basic features and the benefits of the plan. This will not give you any insights into the returns. To figure out the returns, let us work out the Internal Rate of Return for benefit illustration taken from the policy brochure. The potential return of LIC Bima Shree can be compared with other investment returns. This will guide you in decision-making.
Benefit Illustration – IRR(Internal rate of return i.e. Interest Rate) Analysis of LIC Bima Shree
For example, a 30-year-old male buys LIC Bima Shree for a Sum assured of ₹10 Lakhs. The premium paying term is 10 years and the policy term is 14 years. The annualised premium is 1,08,584.
| Male | 30 years |
| Sum Assured | ₹ 10 Lakhs |
| Policy term | 14 years |
| Premium paying term | 10 years |
| Annualised premium | 1,08,584 |
The Survival Benefit of ₹3 lakhs is available to the policyholder twice. And final Maturity Benefit including all the bonuses is available at the end of 14 years.
It is assumed that the Projected Investment Rate of Return that LIC will be able to earn throughout the term of the policy will be 4% p.a. or 8% p.a., as the case may be.
The Projected Investment Rate of Return is not guaranteed and they are not the upper or lower limits of what you might get back, as the value of your policy is dependent on a number of factors including actual future investment performance.
| Age | Year | At 4% p.a. | At 8% p.a. | ||
| Annualised premium / Maturity Benefit | Death Benefit | Annualised premium / Maturity Benefit | Death Benefit | ||
| 30 | 1 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 31 | 2 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 32 | 3 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 33 | 4 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 34 | 5 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 35 | 6 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 36 | 7 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 37 | 8 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 38 | 9 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 39 | 10 | -1,08,584 | 10,00,000 | -1,08,584 | 10,00,000 |
| 40 | 11 | 3,00,000 | 10,00,000 | 3,00,000 | 10,00,000 |
| 41 | 12 | 0 | 10,00,000 | 0 | 10,00,000 |
| 42 | 13 | 3,00,000 | 10,00,000 | 3,00,000 | 10,00,000 |
| 43 | 14 | 0 | 10,00,000 | 0 | 10,00,000 |
| 9,25,000 | 10,00,000 | 11,40,000 | 10,00,000 | ||
| IRR | 4.11% | 5.62% | |||
i.) What are the findings from the above illustration?
The final Maturity Value under the 4% scenario is ₹ 9.25 Lakhs. The IRR calculation results in 4.11%. The final Maturity Value under the 8% scenario is ₹ 11.4 Lakhs. The IRR calculation results in 5.62%.
ii.) What can we conclude from the findings?
The returns under Bima Shree under both scenarios will not help you in reaching the required corpus for your goals. The returns are lower than the economic inflation rate. This is the reason behind the shortfall in achieving the corpus.
11.)LIC Bima Shree vs Other Investment Options
LIC Bima offers life cover, Survival Benefits, and Maturity Benefits to the policyholder. However, the returns are not beneficial to an investor. Now, let us work out a scenario where the same premium paid under LIC Bima Shree is invested in an alternate investment avenue.
i.) LIC Bima Shree Vs. Pure Term + ELSS
A Pure Term Policy for a Sum Assured of ₹10 Lakhs would cost 8000 per annum. The Premium Paying Term is 5 years and the Policy Term is 14 years. In the earlier illustration, the Premium Paying Term is 10 years. So, in the next 5 years, ₹ 1.08 Lakhs is available for investment.
For investment, any debt or equity instrument can be chosen based on your risk tolerance. The risk profile is high for equity when compared to debt instruments. Here ELSS fund (equity) is chosen.
| Pure term Life Insurance | |
| Sum Assured | ₹ 10 Lakhs |
| Policy term | 14 years |
| Premium paying term | 5 years |
| Annualised premium | 8,000 |
| Investment | 1,00,584 |
The corpus accumulated under the ELSS fund is withdrawn fully at the end of 10 years. Capital Gains Tax is payable at the time of exiting the fund. Tax Calculation is given below.
An after-tax Maturity Value of ₹ 19.45 Lakhs is invested in a 7% return instrument. From this investment, ₹ 3 Lakhs is withdrawn twice similar to the Survival Benefit under LIC Bima Shree. At the end of 14 years, the amount left in the investment is withdrawn fully to match the Maturity Benefit under LIC Bima Shree.
| Age | Year | Term insurance + ELSS | |
| Term Insurance premium + ELSS | Death Benefit | ||
| 30 | 1 | -1,08,584 | 10,00,000 |
| 31 | 2 | -1,08,584 | 10,00,000 |
| 32 | 3 | -1,08,584 | 10,00,000 |
| 33 | 4 | -1,08,584 | 10,00,000 |
| 34 | 5 | -1,08,584 | 10,00,000 |
| 35 | 6 | -1,08,584 | 10,00,000 |
| 36 | 7 | -1,08,584 | 10,00,000 |
| 37 | 8 | -1,08,584 | 10,00,000 |
| 38 | 9 | -1,08,584 | 10,00,000 |
| 39 | 10 | -1,08,584 | 10,00,000 |
| 40 | 11 | 3,00,000 | 10,00,000 |
| 41 | 12 | 0 | 10,00,000 |
| 42 | 13 | 3,00,000 | 10,00,000 |
| 43 | 14 | 0 | 10,00,000 |
| 18,12,863 | 10,00,000 | ||
| IRR | 9.25% | ||
| ELSS Tax Calculation | |
| Maturity value after 10 years | 20,33,858 |
| Less | |
| Purchase price | 10,45,840 |
| Long-term capital gains | 9,88,018 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 8,88,018 |
| Tax paid on LTCG | 88,802 |
| Maturity value after tax | 19,45,056 |
For term insurance and ELSS investment, the IRR works out to be 9.25%. Under this alternate investment, you get life cover, Survival Benefits, and Maturity Benefits. And at the same time, you get better returns than LIC Bima Shree.
The IRR analysis shows that to get an inflation-beating return, it is wise to invest separately. Clubbing insurance and investment will not be beneficial in either way.
ii.) LIC Bima Shree Vs. LIC New Money Back Plan (25 years)
Let’s look at some of the features of the LIC New Money Back Plan,
- It provides a 20-year fixed premium payment period in addition to a 25-year fixed policy term.
- Premiums can be paid in the following modes: quarterly, monthly, half-yearly, or annually.
- Benefits related to Guaranteed Survival are awarded regularly.
You can read the complete review of the LIC New Money Back Plan for better clarity of the various Good and Bad aspects of this plan.
iii.) LIC Bima Shree Vs. LIC New Endowment Plus
Let’s look at some of the features of LIC New Endowment Plus,
- Premium payments can be made on a yearly, half-yearly, quarterly, or monthly basis.
- Paying for premiums on terms that work best for you can be chosen.
- The policy term and the premium-paying term are the same.
You can read the complete review of LIC New Endowment Plus for better clarity of the various Good and Bad aspects of this plan.
12). LIC Bima Shree Vs. Other Investment Options – Review Conclusion
All other alternative investment choices, Term Insurance + PPF, Term Insurance + ELSS, and other LIC plans, have been compared and examined with LIC Bima Shree.
LIC Bima Shree is a plan that combines insurance with investments. Is it wise to combine insurance with investments? The conclusion drawn from our analysis is a loud “No”. Therefore, choose Pure Term Insurance for life insurance instead of endowment plans and invest in PPF, or choose ELSS if you need even higher returns.
13.)Final verdict on LIC Bima Shree – Good or Bad Investment Option?
Lima Bima Shree ensures periodic payouts and life insurance coverage during the policy term. The periodic payment fails to empower you to meet important milestones. Because the return on investment is lower than the inflation rate.
Despite paying a hefty sum of money as a premium, the family would be still underinsured. Buying LIC Bima Shree neither gives you adequate life insurance protection nor the best investment option.
All insurance cum saving plans involve high costs and lack transparency, also a high agent commission is given to sell these plans. Alternatively, opting for pure term insurance for life cover and investing separately for life goals is ideally the best route.
when selecting your investment option, it is essential to align them with your life objectives and risk appetite.
If you find difficulties in choosing the right investment instruments, instead of surfing through social media platforms like Quora, Facebook, Twitter, etc, consult a professional financial planner for a comprehensive financial plan.
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