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Let’s face the facts: We are not getting any younger day by day. We have many domestic responsibilities and not every one of us is lucky enough to have an assured source of income as we approach retirement, or, God forbid, in the unfortunate event of death.
Still, we all have the choice of not only safeguarding ourselves and our loved ones in such scenarios but preparing for a financially secure future for the duration of our lifetime. And even after that.
Life Insurance Corporation of India celebrated its sixtieth-anniversary last year. In keeping with its salient product launches and the image of the most trusted insurance company of the country, the company launched the LIC Bima Diamond Plan on September 19, 2016.
This is a non-linked plan, which means it doesn’t depend on the share market. Another feature which you would find extremely convenient is that it is a limited premium paying money back plan – You would be paying premiums for a duration which is far less than the actual policy coverage period.
This is one of the close-ended plans, with the last date for enrollment being August 31, 2017.
1. You will start getting back your money as you complete every four years of your policy period
2. Extended coverage after policy matures
3. Premium paying terms much less than policy coverage duration
4. Choice to opt for accidental benefit and to include term riders
5. Avail the benefits of section 80c of the income tax act as paid premiums are exempt
6. Enjoy tax-exempt maturity amount
Eligibility Criteria and Policy Terms
The minimum basic sum assured is rupees 100,000, and the maximum is rupees 500,000 under this policy.
|Policy Term||Minimum Entry Age||Maximum Entry Age||Maximum Maturity Age||Extended Cover Period|
|16 Years||14 Years||50 Years||66 Years||8 Years|
|20 Years||14 Years||45 Years||65 Years||10 Years|
|24 Years||14 Years||41 Years||65 Years||12 Years|
There are basically four types of benefits under this policy:
1. Death Benefit: In the unfortunate incident the policyholder dies during the first five years of the policy term the “Sum Assured on Death” would be payable.
In case of death after a period of five years but before the policy matures, besides the sum assured, an additional amount would be payable as ‘Loyalty Addition’.
In case of death during the Extended Coverage, 50% of the basic sum assured would be paid out.
2. Survival Benefit: Contingent to the policyholder being alive and all due premiums being paid, at the end of every four years of the policy period, a fixed percentage of the Basic Sum Assured would be paid out.
3. Maturity Benefit: Once the policy matures, and provided you have paid up all premiums due, you shall be paid the Sum Assured on Maturity as well as a Loyalty Addition, if applicable.
4. Loyalty Addition: LIC believes in nurturing relationships with their customers. What would be more appropriate for us than to reward those policyholders who have duly paid up all premiums completely during and on the maturity of the policy?
The company does this by enabling the policyholders to participate in profits in the form of a Loyalty Addition. This shall be applicable after the completion of five years, before/at maturity, or in the unfortunate incident of the policyholder expiring.
The rates and terms shall be determined by the LIC keeping in mind the company’s experience with the policyholder.
|Policy Term||Death Benefit||Survival Benefit||Maturity Benefit||Loyalty Addition|
|16 Years||Sum Assured||15% of Basic Sum Assured at the end of 4th, 8th and 12th policy year||55% of Basic Sum Assured||Upon death & after five years|
|20 Years||Sum Assured||15% of Basic Sum Assured at the end of 4th, 8th, 12th and 16th policy year||40% of Basic Sum Assured||Upon death & after five years|
|24 Years||Sum Assured||12% of Basic Sum Assured at the end of 4th, 8th, 12th, 16th and 20th policy year||40% of Basic Sum Assured||Upon death & after five years|
Note: Sum Assured on Death being the highest of 10 times of annualized premiums, or, amount assured on maturity, or absolute amount assured upon death.
Unique Features of the Policy
1. You are “Auto Covered” even if you miss paying a premium: If all premiums have been duly paid for not less than three years but less than five years, and you miss a payment, you are auto-covered for six months.
If you have paid all premiums for a full five years and miss subsequent premium(s), you are auto-covered for a period of two years.
2. You get Optional Benefits in the form of Accidental Death and Disability Benefit, and New Term Assurance Rider. However, the Rider sum won’t exceed the Basic Sum Assured.
3. You remain being covered even after the policy matures for a period half the duration of the actual policy coverage period, for half the amount of the Basic Sum Assured.
For instance, if you have bought a policy of 24 years’ duration for the amount of rupees 500,000 you would still be covered for another 12 years once the policy matures for a risk cover of rupees 250,000. And you won’t be paying any premiums!
You Pay Premiums for Far Lesser Number of Years than the Policy Period
There are three Policy Term options you get:
1. 16 Years: Pay premiums only for the first 10 years
2. 20 Years: Pay premiums only for the first 12 years
3. 24 Years: Pay premiums only for the first 15 years
You also have a choice in deciding the mode of paying premiums and can choose between yearly, half-yearly, quarterly or even monthly.
Following is an example of the premium rates you would be paying annually per rupees thousand of the Basic Sum Assured. This excludes service tax:
|Policy Term||Age: 20||Age: 30||Age: 40||Age: 50|
There can be two scenarios with this Money Back life insurance plan.
First, and as we would wish for, you as the policyholder survive the duration of the policy coverage.
Suppose you are 25 years of age when you buy this policy for a sum assured of rupees 500,000 in 2016. Below are your money back and maturity details in the table.
|On Completion Of||Year||Your Age||Your Money Back||Calculation|
|4th Year||2020||29||60000||12% of Sum Assured|
|8th Year||2024||33||60000||12% of Sum Assured|
|12th Year||2028||37||60000||12% of Sum Assured|
|16th Year||2032||41||60000||12% of Sum Assured|
|20th Year||2036||45||60000||12% of Sum Assured|
|24th Year||2040||49||200000 + LA||40% of Sum Assured + Loyalty Addition at Policy Maturity|
What’s even better is that as this plan comes with an extended life cover, you continue being covered under it from the age of 49 (when the policy matures) to 61 years of age. That means the extended cover would be until the year 2052, with the risk cover amount being rupees 250,000.
In the second and unfortunate scenario should you not survive the policy term of 24 years then the year/age wise death claim would be:
|Year of Death||Death Age||Premium Paid||Claim||Accidental Death Claim|
|2021||30||177302||500000 + Loyalty Addition||1000000 + Loyalty Addition|
|2022||31||206762||500000 + Loyalty Addition||1000000 + Loyalty Addition|
|2023||32||236222||500000 + Loyalty Addition||1000000 + Loyalty Addition|
|2024||33||265682||500000 + Loyalty Addition||1000000 + Loyalty Addition|
|2025||34||295142||500000 + Loyalty Addition||1000000 + Loyalty Addition|
This plan assures you a regular income to provide safeguards against loss of other regular income as you grow older. For instance, you could plan your child’s higher education
You would be paying premiums for a considerably shorter duration of years than the policy coverage. For instance, you would be paying premiums only for the 12 years of the policy term of 20 years
You remain being covered by the ‘Auto Cover’ feature of this policy even if you miss paying a few premiums
You can surrender the policy anytime after three years
You are eligible for a loan on the policy after the first three years
You are eligible for a rebate on the high sum assured of 2.5% for rupees 200,000 to rupees 4,80,000, and a rebate of 3% for rupees 500,000, per rupees 1,000 of the sum assured