LIC has recently launched a new plan called LIC Bima Jyoti (860). It is a non-linked, non-participating and limited premium payment plan. This article will take you into the details and review of the LIC Bima Jyoti Plan. But before that, let us first see what non-participating, non-linked and limited premium payment is all about.
LIC Bima Jyoti (Plan 860) – Details
Non-Linked – It is a traditional life insurance plan i.e. your premium is not invested in the stock market.
Non-Participating – The maturity amount does not depend on the bonuses which are declared by LIC every year. You will come to know the maturity value of the plan in the beginning itself.
Limited Premium Payment Term – You will not have to pay the premium for entire term of the policy. There are 3 options of limited premium.
15(10) – You will pay the premium for 10 years and the policy will mature after 15 years.
18(13) – You will pay the premium for 13 years and the policy will mature after 18 years.
20(15) – You will pay the premium for 15 years and the policy will mature after 20 years.
Minimum/Maximum age of entry – 90 days/60 years
Minimum/Maximum age at maturity – 18 years/75 years
Sum Assured – Minimum 1 Lakh/Maximum No limit
LIC Bima Jyoti Maturity Benefits
Since this is a non-participating plan, let’s see how the maturity benefits will be calculated in LIC Bima Jyoti.
Maturity Benefit – Basic Sum Assured + Guaranteed Addition
Guaranteed additions are fixed at the rate of Rs. 50 per 1000 sum assured.
Suppose you have purchased the LIC Bima Jyoti policy. The basic sum assured in the policy is 10 Lakhs and term of the policy is 20 years. On maturity, you will get an amount of 20 Lakhs.
How is this maturity amount calculated?
As the guaranteed additions are fixed at Rs. 50 per 1000 sum assured. The total guaranteed addition would be (50/1000) *(sum assured)*(number of years) = (50/1000)*(1000000)*(20) = 10 Lakhs
Maturity Benefit = Basic Sum Assured + Guaranteed Addition = 10 Lakhs + 10 Lakhs = 20 Lakhs.
Death benefits – Basic Sum Assured + Guaranteed Addition
Basic sum assured would be highest of the following.
- 125% of basic sum assured
- 7 times of annualized premium
- 105% of the total premium paid
Here, the guaranteed additions would be calculated only for the number of years in which the premium has been paid. If a policy holder dies after 4 years, he would be paid 2 Lakhs as guaranteed addition (for 4 years).
LIC Bima Jyoti (Plan 860) Returns
LIC Bima Jyoti (Plan 860) Returns will depend on the age and term of the policy. Please note that the guaranteed additions are fixed and not the returns. Why do the returns vary as per the age and policy term?
Higher the age – higher the premium – will lead to low returns.
Let’s analyse the returns for different age groups for different terms of the policy. There are 2 images which will show you the returns.
First Image – Copied from LIC Brochure for premium at different ages and term of the policy. (For a sum assured of 10 Lakhs)
Second Image – It will show the corresponding returns for different ages and term of the policy. (For a sum assured of 10 Lakhs)
Now, you know everything about the returns. Let us check if the maturity amount would be taxable.
LIC Bima Jyoti (Plan 860) – Is Maturity Taxable?
The maturity proceeds of life insurance policy are taxable if sum assured is 10 times less than the annual premium. Suppose the annual premium is 1 Lakh and sum assured is 9 Lakhs, the maturity proceeds would be taxable. Whereas if the sum assured is 10 Lakhs for an annual premium of 1 Lakh, the maturity proceeds would be tax-free.
Now, let’s consider the above-mentioned scenario and premium table (as shown in the above image) for LIC Bima Jyoti Policy. As you can see, the maturity may be taxable for a person aged above 53 or 54 years as 125% of sum assured (Death Benefit) would be less than 10 times of premium (for a 15 years policy term).
Whereas all maturity proceeds would be tax-free for a premium payment term of 13 and 15 years.
Also Read – LIC Jeevan Labh Review
LIC Bima Jyoti Review
So, here is the detailed review of the LIC Bima Jyoti policy (Plan No. 860).
Should you purchase this policy? – The answer is NO even if you are a highly conservative investor.
The returns offered by this policy are exceptionally low.
What is the best option?
If you are a highly conservative investor – You should open a PPF account and start investing.
If you are a moderate investor – You should invest in equity and debt instruments in the ratio of 50:50.
For aggressive investors – You should invest in equity mutual funds.
Feel free to comment down your thoughts and also let me know if you need any further clarification.