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All investors look for a simple and convenient way to secure their financial future and protect their loved ones. A single premium endowment plan is a type of life insurance policy that offers both protection and savings benefits in a single premium payment.
This type of plan seems convenient. But will it be a suitable investment option to achieve your milestone?
This article reviews LIC’s Bima Bachat by dissecting its pros(advantages) and Cons(disadvantages) to check whether the LIC New Bima Bachat will be a Good or Bad decision to reap the reward of both savings and protection.
Let’s get started!
Table of Contents
1.)An overview of LIC New Bima Bachat
2.)What are the Features of LIC New Bima Bachat?
3.)Who is eligible for LIC New Bima Bachat?
4.)What are the Benefits of LIC New Bima Bachat? Review in detail
5.)Free Look period of LIC New Bima Bachat
6.)When can you Surrender LIC New Bima Bachat?
7.)What are the Advantages of LIC New Bima Bachat?
8.)What are the Disadvantages of LIC New Bima Bachat?
9.)Research Methodology of LIC New Bima Bachat
- Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of LIC New Bima Bachat
10.)LIC New Bima Bachat Vs. Other Investment Options
- LIC New Bima Bachat Vs. Pure Term Life Insurance Policy + ELSS
- LIC New Bima Bachat Vs. LIC New Jeevan Shanti
- LIC New Bima Bachat Vs. LIC Bima Jyoti
11.)LIC New Bima Bachat Vs. Other Investment Options – Review Conclusion
12.)Final verdict on LIC New Bima Bachat – Good or Bad?
1. An overview of LIC New Bima Bachat
It is a participating, non-linked, life assurance savings cum protection plan, where the premium is paid in a lump sum at the outset of the policy. It’s a money-back plan that offers Survival Benefits at predetermined intervals throughout the policy term, protecting against death and providing financial security.
Please refer to the official brochure of LIC New Bima Bachat for more policy details.
2. What are the Features of LIC New Bima Bachat?
- LIC New Bima Bachat Policy Term – 9, 12, 15 years.
- On maturity, the single premium shall be returned.
- Loyalty Addition boosts your maturity value.
3. Who is eligible for LIC New Bima Bachat?
| Minimum entry age | 15 years |
| Maximum entry age | 50 years |
| Maximum Maturity age | Policy Term: 9 years – 59 years
Policy Term: 12 years – 62 years Policy Term: 15 years – 65 years |
| Policy Term | 9, 12, 15 years |
| Minimum Sum Assured | Policy Term: 9 years – 35,000
Policy Term: 12 years – 50,000 Policy Term: 15 years – 70,000 |
| Maximum Sum Assured | No limit |
4. What are the Benefits of the LIC New Bima Bachat? Review in Detail
Death Benefit – Analysis
On death during the first five policy years: “Sum Assured on Death”.
On death after completion of five policy years: “Sum Assured on Death” along with Loyalty Addition, if any. Where “Sum Assured on Death” is defined as a higher of
- 1.25 times the single premium; or
- Basic Sum Assured.
Survival Benefits – Analysis
On the Life Assured surviving to the end of the specified durations during the LIC New Bima Bachat Policy Term, a fixed percentage of Basic Sum Assured is payable. The fixed percentage for various LIC New Bima Bachat Policy Terms is as below:
- For Policy Term 9 years: 15% of the Basic Sum Assured at the end of each of the 3rd and 6th policy year
- For Policy Term 12 years: 15% of the Basic Sum Assured at the end of each of the 3rd, 6th, and 9th policy year
- For Policy Term 15 years: 15% of the Basic Sum Assured at the end of each of the 3rd, 6th, 9th, and 12th policy year
Maturity Benefit – Analysis
On Life Assured surviving to the end of the LIC New Bima Bachat Policy Term, “Sum Assured on Maturity” along with Loyalty addition, if any, shall be payable Where “Sum Assured on Maturity” is equal to Single Premium paid.
Loyalty Addition – Analysis
The Loyalty Addition, if any, shall be payable on death after completion of five LIC New Bima Bachat policy years or on the policyholder surviving to maturity, at such rate and under the conditions as may be declared by the Corporation.
5. Free Look period of LIC New Bima Bachat
If the LIC New Bima Bachat Policyholder is not satisfied with the “Terms and Conditions” of the policy, the LIC New Bima Bachat policy may be returned to the Corporation within 15 days from the date of receipt of the policy bond.
6. When can you Surrender LIC New Bima Bachat?
The LIC New Bima Bachat policy can be surrendered by the policyholder at any time during the policy year. On surrender of the LIC New Bima Bachat policy, the Corporation shall pay the Surrender Value equal to the higher Guaranteed Surrender Value and Special Surrender Value.
7. What are the Advantages of LIC New Bima Bachat?
- The loan facility available in LIC New Bima Bachat will take off your liquidity needs. Option to receive Death Benefit in instalments over the chosen period of 5 10 or 15 years instead of lumpsum amount.
- Two rider options are available in LIC New Bima Bachat.
- Option to take Maturity Benefit in installments under the Settlement option.
- Rebate for High Sum Assured.
8. What are the Disadvantages of LIC New Bima Bachat?
- The Loyalty additions start accruing after the end of 5th policy year. And it is a non-guaranteed benefit.
- The Survival Benefit will not aid you in meeting big-ticket expenses.
- The policy returns the premium paid without considering the time value of money.
- In general, a money-back policy pays the full sum assured (100%) through 3 to 4 installments. But, here only a part of the sum assured is paid – 30% to 60% of the sum assured as Survival Benefit.
9. Research Methodology of LIC New Bima Bachat
LIC New Bima Bachat pays Survival Benefits and Maturity Benefits along with Loyalty Addition. The cash flow is guaranteed at regular intervals. But we need to access the plan in terms of returns.
Calculating the Internal rate of return of LIC New Bima Bachat gives you better clarity and you can make a decision, on whether to invest in this plan or not.
Benefit Illustration – IRR(Internal Rate of Return i.e. Interest Rate) Analysis of LIC New Bima Bachat
A 35-year-old male opts for LIC New Bima Bachat plan for a sum assured of ₹ 5 Lakh. The Policy Term is 9 years. The premium amount is ₹ 354,982. He receives a Survival Benefit of 15% of the Sum assured at the end of 3rd and 6th year. He receives the premium back as a Maturity Benefit along with loyalty additions (non-guaranteed).
For the sake of explanation with illustration, it is assumed that the Projected Investment Rate of Return that LICI 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 investment rate of return is not assured and they are not the complete or the minimum of what you will get back because the value of your LIC New Bima Bachat policy relies on many factors that affect the future investment performance.
| Male | 35 years |
| Policy Term | 9 years |
| Sum Assured | 5 Lakhs |
| Premium | 3,54,982 |
| Age | Year | At 4% p.a. | At 8% p.a. | ||
| Annualised premium / Maturity Benefit | Death Benefit | Annualised premium / Maturity Benefit | Death Benefit | ||
| 35 | 1 | -3,54,982 | 5,00,000 | -3,54,982 | 5,00,000 |
| 36 | 2 | 0 | 5,00,000 | 0 | 5,00,000 |
| 37 | 3 | 0 | 5,00,000 | 0 | 5,00,000 |
| 38 | 4 | 75,000 | 5,00,000 | 75,000 | 5,00,000 |
| 39 | 5 | 0 | 5,00,000 | 0 | 5,00,000 |
| 40 | 6 | 0 | 5,00,000 | 0 | 5,00,000 |
| 41 | 7 | 75,000 | 5,00,000 | 75,000 | 5,00,000 |
| 42 | 8 | 0 | 5,00,000 | 0 | 5,00,000 |
| 43 | 9 | 0 | 5,00,000 | 0 | 5,00,000 |
| 3,54,982 | 4,04,982 | ||||
| IRR | 4.78% | 6.02% | |||
He receives the Survival Benefit of 75,000 twice. The final maturity value varies due to the non-guaranteed benefit. Under the 4% scenario, he receives 3.54 Lakh as a Maturity Benefit, and the IRR calculation results in 4.78%.
Under the 8% scenario, he receives 4.04 Lakh as a Maturity Benefit and the IRR calculation results are 6.02%.
The returns from LIC New Bima Bachat are lower than what you could earn from a debt instrument (such as bonds or fixed deposits), so it may not be the most financially prudent choice for you. Endowment plans typically combine life insurance with savings, and therefore they result in lower returns compared to other investment options.
It is vital to thoroughly analyse your financial goals and your willingness to take a risk. If your primary objective is wealth accumulation or you are more risk-averse, you should consider alternative investment options that can offer higher returns.
10. LIC New Bima Bachat Vs. Other Investment Options
LIC New Bima Bachat is a Single Premium Policy. Let us split the single premium into three buckets. One for life cover, the second one to meet the Survival Benefit, and the third one to match the final maturity value.
i) LIC New Bima Bachat Vs. Pure Term Life Insurance Policy + ELSS
A Pure Term Policy for a sum assured of ₹ 5 Lakhs would cost 13,200 (Single premium). The Policy Term is 9 years. For Survival Benefit, let us invest ₹ 1.11 Lakhs for 7 years under a 7% return instrument. From this investment, you can withdraw ₹ 75,000 twice similar to LIC New Bima Bachat.
The 7% return investment amount is calculated in such a way that the balance will become NIL after withdrawing all the Survival Benefits. Finally, the amount left for equity investment is ₹2.30 Lakhs which is invested in the ELSS fund for 9 years. The final maturity value is subject to Capital Gains Tax. Tax calculations are given below.
| Single premium (Illustration) | ₹ 3,54,982.00 |
| Pure Term Insurance Premium | ₹ 13,200.00 |
| The amount available for Investment | ₹ 3,41,782.00 |
| Debt portion (Survival Benefit) | ₹ 1,11,200.00 |
| Equity Portion (Maturity Benefit) | ₹ 2,30,582.00 |
| Age | Year | Pure Term + ELSS | |
| Annualised premium / Maturity Benefit | Death Benefit | ||
| 35 | 1 | -3,54,982 | 5,00,000 |
| 36 | 2 | 0 | 5,00,000 |
| 37 | 3 | 0 | 5,00,000 |
| 38 | 4 | 75,000 | 5,00,000 |
| 39 | 5 | 0 | 5,00,000 |
| 40 | 6 | 0 | 5,00,000 |
| 41 | 7 | 75,000 | 5,00,000 |
| 42 | 8 | 0 | 5,00,000 |
| 43 | 9 | 0 | 5,00,000 |
| 6,08,538 | |||
| IRR | 10.07% | ||
The Pre pre-tax value of equity investment is ₹ 6.39 lakhs. The Post-Tax Value is ₹6.08 Lakhs. The IRR calculation for Pure term Life Insurance + ELSS investment results in 10.07%. This rate comfortably beats inflation.
| ELSS Tax Calculation | |
| Maturity value after 9 years | 6,39,422 |
| Less | |
| Purchase price | 2,30,582 |
| Long-term capital gains | 4,08,840 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 3,08,840 |
| Tax paid on LTCG | 30,884 |
| Maturity value after tax | 6,08,538 |
This alternate option fulfills all the requirements of Viz. Life cover, Survival Benefits, and Maturity Benefits are similar to LIC New Bima Bachat. At the same time, the return is higher than LIC New Bima Bachat.
ii) LIC New Bima Bachat Vs. LIC New Jeevan Shanti
Let’s look at the different features of LIC New Jeevan Shanti,
- Annuity and a single premium payment are made following the conclusion of the deferment term.
- Fixed annuity rates from the policy’s inception.
- There are several alternatives for annuities.
Read the complete review of LIC New Jeevan Shanti to find out whether the plan is Good or Bad.
iii) LIC New Bima Bachat Vs. LIC Bima Jyoti
Let’s look at the different features of LIC Bima Jyoti,
- You can choose your preferred Premium payment method between, yearly, half-yearly, quarterly, or monthly basis under LIC Bima Jyoti.
- As long as you pay the premium on time and without default, you will enjoy the advantages as promised.
- By adding five more riders, you can improve the life insurance.
Read the complete review of LIC Bima Jyoti to find the Advantages(pros) and Disadvantages(cons) of the plan.
11. LIC New Bima Bachat Vs. Other Investment Options – Review Conclusion
After comparing and analyzing the Good and bad aspects of LIC Bhima Bachat with various other investment options, it seems clear that the combination of Pure Term Insurance + PPF or ELSS is a better insurance and investment option. This is because mixing insurance and investment doesn’t work in the long term which is the case with LIC New Bima Bachat.
12. Final verdict on LIC New Bima Bachat – Good or Bad?
With the LIC New Bima Bachat plan, you make a one-time lump sum payment, and in return, the insurance company provides a Death Benefit to the beneficiary if the policyholder passes away during the Policy Term. If the policyholder survives the term, he is entitled to Survival Benefit and Maturity Benefit.
The major drawback that insurance agents hide from you for the fear of losing agent commission is that the policyholder receives a part of the sum assured as a Survival Benefit.
Whereas, other money-back policies in the market offer Survival Benefit in part payments and the summation of Survival Benefit is equal to 100% of the sum assured. Investing in LIC New Bima Bachat is not a good choice.
Alternatively, calculate the required Life cover for yourself and opt for a pure-term life insurance policy. Pure-term policies offer high cover at an affordable premium. This will protect your financial plan.
Before deciding on any investment, it’s important to assess your risk tolerance, investment horizon, and financial goals. Diversifying your investments across different asset classes can help spread risk and potentially enhance returns.
Are you searching for answers to doubts about personal finance on social media sites like Quora, Facebook, Twitter, etc? Consulting a Certified Financial Planner is advisable to make informed decisions tailored to your specific needs and circumstances.
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