LIC New Money Back Policy (Plan 920) Review – Good or Bad Investment Option?
What do Investors with low-risk appetite look for? Guaranteed Benefits!
Money-back policies offer Guaranteed Survival Benefits at regular intervals. What makes these Money Back policies look attractive? They promise to provide life cover and periodic payments to the policyholder throughout the policy term.
But, are these policies as attractive in return as what they look at outside? Will LIC’s New Money Back Policy be a Good or Bad choice for those who are looking for Guaranteed Benefits?
In this article, let us evaluate LIC’s New Money Back plan by analysing its Advantages (pros) and Disadvantages (cons) and find out whether the LIC New Money Back Policy (Plan 920) is a Good or Bad option to invest your hard-earned money.
Let’s get started!
1.)An Overview of LIC’s New Money-Back Policy
2.)What are the Features of LIC’s New Money Back Policy?
3.)Who is eligible for LIC’s New Money Back Policy?
4.)What are the Benefits of the LIC New Money Back Policy? Review in Detail
5.)Grace Period, Paid-up Policy, and Revival of LIC New Money Back Policy
6.)Free Look Period of LIC New Money Back Policy
7.)Surrendering LIC New Money Back Policy – Analysis
8.)What are the Advantages of LIC’s New Money Back Policy?
9.)What are the Disadvantages of LIC’s New Money Back Policy?
10.)Research Methodology of LIC New Money Back Policy – Analysis
11.)LIC New Money Back Policy vs Other Investment Options
12.)LIC New Money Back Policy vs Other Investment Options – Review Conclusion
13.)Final Verdict on LIC New Money Back Policies – Good or Bad?
It is a Non-Linked, Participating, Limited Premium, Individual, Life Assurance plan that offers a combination of protection against death throughout the term of the plan along with the periodic payment on survival at specified durations during the term. This special combination offers a lump sum payment to the surviving policyholders at maturity and financial support to the family of the deceased policyholder at any point before maturity.
Please check the official brochure of LIC New Money Back Plan for more policy details.
| Minimum Age at Entry | 13 years |
| Maximum Age at Entry | 50 years |
| Maximum Age at Maturity | 70 years |
| Minimum Basic Sum Assured | 1,00,000 |
| Maximum Basic Assured | No Limit |
| Policy Term | 20 years |
| Premium Paying Term | 15 years |
The Death Benefit 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 vested Simple Reversionary Bonuses and Final Additional Bonus, if any. Where “Sum Assured on Death” is defined as a higher of
In case of Life Assured surviving to the end of the specified durations provided all due premiums have been paid, 20% of the Basic Sum Assured shall be payable at the end of each of the 5th, 10th, and 15th LIC New Money Back policy years.
If the policy is still in effect at the end of the LIC New Money Back policy term, the “Sum Assured on Maturity” will be paid, along with any vested Simple Reversionary Bonuses and Final Additional Bonuses. Where 40% of the Basic Sum Assured is equal to the “Sum Assured on Maturity”
The LIC New Money Back policy shall participate in the profits of the Corporation and shall be entitled to receive Simple Reversionary Bonuses declared as per the experience of the Corporation, provided the LIC New Money Back policy is in force.
A final Additional Bonus may also be declared under the LIC New Money Back policy in the year when the policy results in a claim either by death or maturity.
Grace period
In the LIC New Money Back Policy, 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’ premiums have been paid and any subsequent premium is not duly paid, all the benefits under the LIC New Money Back policy shall cease after the expiry of the grace period from the date of the first unpaid premium and nothing shall be payable.
If at least two full years’ premiums have been paid and any subsequent premiums are not duly paid, the LIC New Money Back policy shall not be wholly void but shall continue as a paid-up policy till the end of the LIC New Money Back policy term.
Revival
A lapsed LIC New Money Back policy can be revived within a period of 5 consecutive years from the date of the first unpaid premium but before the Date of Maturity.
If the LIC New Money Back Policyholder is not satisfied with the “Terms and Conditions”, the LIC New Money Back policy may be returned to us within 15 days beginning on the day the policy bond was received and should include reasons for returning the policy.
The LIC New Money Back policy can be surrendered at any time provided two full years’ premiums have been paid. On surrender of the policy, the Corporation shall pay the Surrender Value equal to higher of Guaranteed Surrender Value or Special Surrender Value.
The earlier sections covered the basic features, Maturity Benefits, Death Benefits, and other benefits. In this section, let us evaluate the plan in terms of return. You need to make a decision based on the return calculation. Now, let us take a quote from the LIC portal and calculate the internal rate of return.
A 30-year-old male opts for a 5 Lakh Sum Assured LIC Money back policy. The policy term is 20 years and the premium paying term is 15 years. The annualised premium is ₹ 37,259.
| Male | 30-years |
| Policy Term | 20 years |
| Premium Paying term | 15 years |
| Sum Assured | 5 Lakhs |
| Annualised premium | 37,259 |
If he pays the premium regularly, he is entitled to Survival Benefit thrice during the policy term. The illustrations will show two different rates of assumed future investment returns, 8% p.a. and 4% p.a.
The value of your policy depends on several circumstances, including future investment performance, so these anticipated rates of return are not guarantees nor upper or lower limitations of what you might earn back.
| Age | Year | At 4% p.a. | At 8% p.a. | ||
| Annualised premium / Maturity Benefit | Death Benefit | Annualised premium / Maturity Benefit | Death Benefit | ||
| 30 | 1 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 31 | 2 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 32 | 3 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 33 | 4 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 34 | 5 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 35 | 6 | 62,741 | 5,00,000 | 62,741 | 5,00,000 |
| 36 | 7 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 37 | 8 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 38 | 9 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 39 | 10 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 40 | 11 | 62,741 | 5,00,000 | 62,741 | 5,00,000 |
| 41 | 12 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 42 | 13 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 43 | 14 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 44 | 15 | -37,259 | 5,00,000 | -37,259 | 5,00,000 |
| 45 | 16 | 1,00,000 | 5,00,000 | 1,00,000 | 5,00,000 |
| 46 | 17 | 0 | 5,00,000 | 0 | 5,00,000 |
| 47 | 18 | 0 | 5,00,000 | 0 | 5,00,000 |
| 48 | 19 | 0 | 5,00,000 | 0 | 5,00,000 |
| 49 | 20 | 0 | 5,00,000 | 0 | 5,00,000 |
| 50 | 21 | 2,70,000 | 5,00,000 | 4,92,500 | 5,00,000 |
| IRR | 0.26% | 3.98% | |||
The Survival Benefit of 1 lakh i.e., 20% of the Sum Assured is available thrice. The balance of 40% of the sum assured along with the bonus (non-guaranteed) is available at maturity.
In the 4% scenario, the final maturity amount is 2.70 Lakhs and the IRR calculation results in0.26% i.e., You get back what you paid already without any addition. Even if you park your money simply in your savings account, at least you would have earned better returns and the money is readily available for you at any time.
At the 8% scenario, the final maturity amount is 4.92 Lakhs and the IRR calculation results in 3.98%. This rate is lower than inflation.
The returns from LIC New Money Back policy are lower than what you could earn from a debt instrument (such as bonds or fixed deposits), it may not be the most financially prudent choice for you. Endowment / Money plans typically combine life insurance with savings, and therefore they result in lower returns compared to other investment options.
It’s critical to assess your risk tolerance and financial objectives. If you are more risk-averse or your main goal is to accumulate wealth, you might think about other investing strategies that have the potential to yield larger returns.
LIC’s new money-back policy offers periodic cash flow. But it disturbs the compounding process. Compounding works better in the long term. For your Life cover you can choose a Pure Term Insurance policy and there are other investment options to invest your savings.
The choice will depend on your financial goals, risk tolerance, and investment horizon. Here are some options to explore.
LIC New Money Back Policy vs Mutual Funds, FDs and Government-Backed Schemes
Mutual Funds:
Mutual funds offer a diversified investment portfolio, and you can choose funds that align with your risk tolerance and investment goals. They provide options for equity, debt, and hybrid funds.
Fixed Deposits (FDs) and Government-Backed Schemes:
If you prefer safety and stability, you can opt for fixed deposits with banks /other financial institutions and also Post-office small savings schemes. They offer a fixed interest rate and are a low-risk option.
Though we suggest some alternate investments, your mind may look for numbers. How far do these alternate investments score better than LIC’s New Money Back Policy in terms of returns? – To answer this question, we have gathered the potential returns of these alternate investments and given them in the table below (As of Oct 2023).
| Particulars | Potential Returns |
| Nifty 50 TRI (10-Year Return) | 13.08% |
| SandandP 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% |
The above illustration clearly shows that there is a plethora of investment options that offer better returns than the LIC New Money Back Policy. You need to pick an investment that aligns with your investment horizon and risk profile.
Let’s see the features of LIC New Bima Bachat,
To read the complete review of LIC New Bima Bachat please Click Here.
Let’s look at some of the advantages of the LIC New Endowment Plan (Plan no.914)
Please Click Here To read the complete review of the LIC New Endowment Plan (Plan no.914).
We discovered that it is not advisable to combine investments and insurance after analyzing the IRR of the LIC New Money Back Policy. This stands valid even when the LIC New Money Back Policy is compared with alternate investment choices.
Taking Pure Term Insurance for Life cover and Investing in Mutual Funds, Fixed Deposits (FDs) or Government Backed Schemes is a far better option compared with LIC’s New Money Back Policy.
LIC’s New Money Back Policy offers a combination of financial protection and a source of periodic income. They are suitable for individuals who may require periodic payouts during the policy term. While evaluating the plan, we couldn’t find any special feature. This is a mediocre plan which falls short in terms of return.
The lower return on investment is due to the Survival Benefit and also partly because of the high agent commission. The poor survival Benefits slowly reduce the effectiveness of the investment component in this plan. Alternatively, starting early and remaining committed to a long-term investment approach can make a significant difference in achieving your financial objectives. Long-term investment and the power of compounding are two critical elements in building wealth and achieving financial goals.
Compounding is the process by which your invested money earns returns, and those returns, in turn, earn more returns over time. The longer you commit to a well-thought-out investment plan, the more time your money has to compound, exponentially increasing the growth of your wealth.
Therefore, you should carefully assess your financial goals and consider alternative investment options. To achieve this, instead of searching for a solution on social media sites like Quora, Facebook, Twitter, etc. it is better to consult a certified financial planner for a comprehensive financial plan.
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