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Is LIC’s New Money Back Policy a good Investment product considering future milestones?
Will allocating your funds to LIC’s New Money Back Policy help you achieve your goals?
Financial Planning helps you evaluate your current financial position. It also guides you in managing your financial resources to achieve your long-term and short-term goals.
With proper Financial Planning, you will be able to make those informed decisions while choosing the investment avenues.
In this article, let us review the LIC New Money back policy (25 years) Advantages (Pros) and Disadvantages (Cons) to check the suitability of the plan.
The research analysis done here will be of great assistance in your Investment Decision Making.
Table of Contents
1.)What is LIC’s New Money Back Policy 25-year Plan?
2.)What are the Features of the LIC New Money Back Policy 25-year Plan?
3.)What are the Eligibility Criteria for LIC New Money Back Policy 25-year Plan?
4.)What are the Benefits of LIC’s New Money Back Policy 25-year Plan?
- The death benefit of LIC New Money Back Policy 25-year Plan
- Survival Benefits of LIC New Money Back Policy 25-year Plan
- Maturity Benefit of LIC New Money Back Policy 25-year Plan
- Participation in Profits
5.)Grace Period, Paid-up Policy, and Revival
6.)Free Look Period in LIC New Money Back Policy 25-year Plan
7.)How to Surrender LIC New Money Back Policy 25-year Plan?
8.)Advantages of LIC New Money Back Policy 25-year Plan
9.)Disadvantages of LIC New Money Back Policy 25-year Plan
10.)LIC New Money Back Policy 25-year Plan Research Methodology
- LIC New Money Back Policy 25-year Plan Benefit Illustration – IRR Analysis
11.)LIC New Money Back Policy 25-year Plan VS Other Investments
12.)Final Verdict on LIC New Money Back Policy 25-year Plan
1.) What is LIC’s New Money Back Policy 25-year Plan?
This LIC New Money Back Policy 25-year Plan is a Non-Linked, Participating, Limited Premium, Individual, Life Assurance plan.
It provides investors with a combination of protection against death for the whole policy term along with the periodic payment on survival at specified durations during the term.
LIC New Money Back Policy 25 offers the surviving policyholders a lump sum payment at maturity and financial support to the relatives on the death of the policyholder at any point prior to maturity.
2.) What are the Features of LIC’s New Money Back Policy 25-year Plan?
- It offers a fixed policy term of 25 years and a fixed premium paying term of 20 years.
- Premiums can be paid at chosen mode it can be yearly, half-yearly, quarterly, or monthly biases.
- Guaranteed Survival benefits are given at periodic intervals.
- Maturity benefit also includes non-guaranteed bonuses.
3.) What are the Eligibility Criteria for LIC New Money Back Policy 25-year Plan?
| Minimum Age at Entry | 13 years |
| Maximum Age at Entry | 45 years |
| Maximum Age at Maturity | 70 years |
| Minimum Basic Sum Assured | 1,00,000 |
| Maximum Basic Assured | No Limit |
| Policy Term | 25 years |
| Premium Paying Term | 20 years |
4.) What are the Benefits of LIC’s New Money Back Policy 25-year Plan?
The death benefit of LIC New Money Back Policy 25-year Plan
The death benefit is payable in case of death of the Life Assured during the policy term provided the policy is in force shall be “Sum Assured on Death”.
Along with the Sum Assured on death, the investor also receives vested Simple Reversionary Bonuses and a Final Additional Bonus, if any.
Here the “Sum Assured on Death” is defined as higher of the following:
- 125% of the Basic Sum Assured or
- 7 times of annualized premium.
- This death benefit shall not be less than 105% of the total premiums paid up to the date of death.
Survival Benefits of LIC New Money Back Policy 25-year Plan
In the case of Surviving Life Assured till the end of the specified durations provided all due premiums have been paid. Then 15% of the Basic Sum Assured shall be payable at the end of each of the 5th, 10th, 15th, and 20th policy years.
Maturity Benefit of LIC New Money Back Policy 25-year Plan
The LIC New Money Back Policy 25-year Plan matures at the end of the policy term. Here, the Maturity Benefit will be
“Sum Assured on Maturity” along with vested Simple Reversionary Bonuses, and a Final Additional Bonus, if any, shall be payable.
Where “Sum Assured on Maturity” is 40% of the Basic Sum Assured.
Participation in Profits
The LIC New Money Back Policy will also participate in the profits of the Corporation and will be entitled to receive Simple Reversionary Bonuses declared as per the experience of the Corporation.
A final Additional Bonus may also be declared under the policy in the same year when the policy results in a claim either by death or maturity.
5.)Grace Period, Paid-up Policy, and Revival
Grace period
A grace period of 30 days is applicable on payment modes of yearly half-yearly or quarterly premiums and also for 15 days for monthly premiums from the date of the first unpaid premium.
Paid-up Policy
If the investor fails to pay the premium for 2 years and after that, any subsequent premium is not duly paid, then all the benefits under the policy shall cease after the expiry of the grace period from the date of the first unpaid premium and nothing shall be payable.
If the premium has been successfully paid for at least two years and then any subsequent premiums are not duly paid, then the policy shall not be wholly void, but it will continue as a paid-up policy till the policy term ends.
Revival
An expired policy can be revived within 5 consecutive years from the date of the first unpaid premium but before the Date of Maturity.
6.)Free Look Period in LIC New Money Back Policy 25-year Plan
If the Policyholder doesn’t feel good about the “Terms and Conditions”, then the policy can be returned to them within 15 days from the date of receipt of the policy bond stating the reasons for objections.
For a better understanding of the “Terms and Conditions”. You can refer to the LIC New Money Back Policy 25-year Plan Policy Brochure
7.)How to Surrender LIC New Money Back Policy 25-year Plan?
After paying the premium for two years the investor can surrender the policy at any time. On surrender of the policy, the Corporation shall pay the Surrender Value equal to higher of Guaranteed Surrender Value or Special Surrender Value.
8.)Advantages of LIC New Money Back Policy 25-year Plan
- To enhance the cover, 4 rider options are available.
- Under the Settlement Option, you can receive Maturity Benefits in installments over the chosen period of 5 10, or 15 years instead of a lump sum amount.
- Rebate is available for a high sum assured.
- The loan can be availed and the maximum loan amount is 90% of the surrender value.
- Option to receive the death benefit in installments over the chosen period of 5 10 or 15 years instead of a lump sum amount.
9.)Disadvantages of LIC New Money Back Policy 25-year Plan
- The survival benefit will not help you meet any big-ticket expenses.
- The return on investment is low.
- The premium paying term and policy term are fixed.
10.)Research Methodology of LIC New Money Back Policy 25-year Plan Review
LIC New Money Back Policy offer maturity benefit and survival benefit to take care of your liquidity. But you should figure out the return, before making an investment decision.
The Internal Rate of Return (IRR) can be figured out by taking a quote from the portal. This number can be compared with other investment returns.
11.)LIC New Money Back Policy 25-Year Plan’s Benefit Illustration – IRR Analysis
A 30-year-old male opts for LIC New Money Back Policy 25-year Plan for a sum assured of ₹ 5 lakhs. The policy term is 25 years and the Premium Paying Term is 20 years. The annualised premium is ₹ 28,610
| Male | 30-years |
| Policy Term | 25 years |
| Premium Paying term | 20 years |
| Sum Assured | 5 Lakhs |
| Annualised premium | 28,610 |
If he pays the premium regularly, he is eligible to get a survival benefit of ₹ 75,000 each at the end of the 5th, 10th, 15th, and 20th year. At maturity, he receives the balance sum assured i.e., ₹ 2 lakhs, and accrued bonus in addition to that.
For benefit illustration purposes, 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.
The Projected Investment Rate of Return depicted over here 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 several factors including actual future investment performance.
| At 4% p.a. | At 8% p.a. | ||||
| Age | Year | Annualised premium / Maturity benefit | Death benefit | Annualised premium / Maturity benefit | Death benefit |
| 30 | 1 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 31 | 2 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 32 | 3 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 33 | 4 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 34 | 5 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 35 | 6 | 46,390 | 5,00,000 | 46,390 | 5,00,000 |
| 36 | 7 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 37 | 8 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 38 | 9 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 39 | 10 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 40 | 11 | 46,390 | 5,00,000 | 46,390 | 5,00,000 |
| 41 | 12 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 42 | 13 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 43 | 14 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 44 | 15 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 45 | 16 | 46,390 | 5,00,000 | 46,390 | 5,00,000 |
| 46 | 17 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 47 | 18 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 48 | 19 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 49 | 20 | -28,610 | 5,00,000 | -28,610 | 5,00,000 |
| 50 | 21 | 75,000 | 5,00,000 | 75,000 | 5,00,000 |
| 51 | 22 | 0 | 5,00,000 | 0 | 5,00,000 |
| 52 | 23 | 0 | 5,00,000 | 0 | 5,00,000 |
| 53 | 24 | 0 | 5,00,000 | 0 | 5,00,000 |
| 54 | 25 | 0 | 5,00,000 | 0 | 5,00,000 |
| 55 | 2,87,500 | 6,25,000 | |||
| IRR | 0.29% | 4.43% | |||
The maturity value under the 4% scenario is ₹ 2.87 Lakhs and the IRR calculation results in 0.29%. If you keep your money idle in your savings bank account, you will get better returns and the money is readily available to you.
The maturity value under the 8% scenario is ₹ 6.25 Lakhs and the IRR calculation results in 4.43%. This return is lower than any other debt instrument. Typically, a bank fixed deposit earns a better return than the LIC New Money Back Policy 25-year Plan.
You should also consider the impact of inflation on real returns. While money-back policies provide a steady income, the real value of these returns may decrease over time due to inflation.
12.)LIC New Money Back Policy 25-year Plan VS Other Investments
Money-back policies generally offer guaranteed returns, ensuring that a certain percentage of the sum assured is paid out at regular intervals.
But there are other instruments that provide guaranteed returns, liquidity advantage, and also earn better returns than LIC New Money Back Policy 25-year Plan.
Now, let us explore alternatives to traditional money-back policies and discover a world of diversified options.
Your financial success requires strategic investment choices tailored to your goals and risk tolerance. Here are some alternatives you can consider:
Systematic Investment Plan (SIP) in Mutual Funds:
Investing in mutual funds through a SIP allows you to regularly invest a fixed amount at predetermined intervals. Mutual funds offer diversification across various asset classes, such as equities, debt, and hybrid funds, catering to different risk profiles.
Fixed Deposits (FDs):
Fixed deposits are a traditional and low-risk investment option. They offer a fixed interest rate over a specified period, providing stability in returns.
Post Office Small Savings Schemes:
Schemes like the Public Provident Fund (PPF), National Savings Certificate (NSC), and Senior Citizens Savings Scheme (SCSS) offered by the government provide fixed returns with varying lock-in periods. These are considered safe investment options.
The following table will help you to navigate with better clarity as it provides you with the potential return of each investment avenue (As of Oct 2023).
| Particulars | Potential Returns |
| Nifty 50 TRI (10-Year Return) | 13.08% |
| SandP BSE 500 TRI (10-Year Return) | 14.72% |
| Equity Mutual Fund: Large Cap (10-year Avg) | 8.20% |
| Equity Mutual fund: Multi Cap (10-year Avg) | 15.34% |
| Equity Mutual Fund: ELSS (10-year Avg) | 10.79% |
| FD Returns | 6%-7% |
| RBI Floating Rate Bond | 8.05% |
| Post Office Small Saving Schemes | |
| 5-year RD | 6.70% |
| PPF | 7.10% |
| 5-year Time deposit | 7.50% |
| National savings Certificate | 7.70% |
| Sukanya Samridhi | 8% |
This table throws light on some of the alternate investment options where you can yield better returns than the LIC New Money Back Policy 25-year Plan. At the same time, you can also diversify your investments across different asset classes.
This in turn can help you manage risk.
i) LIC New Money Back Policy 25-year Plan VS LIC Nivesh Plus Plan
Let us understand the features available under the LIC Nivesh Plus Plan.
- Two variants are available under this plan.
- Flexibility to choose from four fund options.
- Guaranteed additions after a specific duration enhance the fund value.
If you wish to know more about this plan then you read out our article on LIC New Endowment Plus Review – Should You Invest?
ii) LIC New Money Back Policy25 Years VS LIC New Money Back Policy (Plan no. 920)
Now let’s have a brief look at the key characteristics of LIC New Money Back Policy (Plan 920)
Option to choose five more riders.
The Flexibility to accept the Death Benefit in installments.
Loan Options are available under this plan.
For Advantages (Pros) and Disadvantages (cons) you can refer to our article on LIC New Money Back Policy of 25 Years(Plan 920) Review – Good or Bad Investment Option?
13.)LIC Money Back Policy 25-year Plan VS Other Investments
When we looked at the IRR of the LIC New Money Back Policy 25-year Plan. We have found that combining investments and insurance is not a good idea.
This still holds true when comparing the LIC New Money Back Policy 25-year Plan to other investing options.
Instead of the LIC New Money Back Policy 25-year Plan, investing in government-backed schemes or mutual funds, or fixed deposits (FDs) and purchasing a pure term insurance for life coverage helps you achieve your goals.
14.)Final Verdict on LIC New Money Back Policy 25-year Plan – Is it Good or Bad?
Money Back Plans are known for their periodic survival benefits. Under the LIC New Money Back Policy 25-year plan, the policyholder receives the survival benefit 4 times. Each of which is 15% of the sum assured for every 5 years.
The balance 40% of the sum assured is receivable at the time of maturity. This can be beneficial to investors looking for periodic payouts.
LIC New Money Back Policy 25-year Plan is a long-term investment vehicle. However, the returns from the plan will not help you cope with the inflation in the long run. This plan is not suitable for investors in terms of life cover and investment as well.
But still, agents will push you to purchase this plan for their high agent commission.
For life cover, you can opt for a pure term life insurance policy which offers high coverage at an affordable premium. Before making any investment decision, it is crucial to evaluate the plan.
We have gathered up a few alternate investment options you can consider, but still choosing the option that best suits your financial goals, risk tolerance, and investment horizon is very important.
Your Investment Choice or Decision should not be based on social media platforms like Quora, Facebook, Twitter, etc. Consulting with a financial advisor can provide personalized insights based on individual circumstances.
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