LIC’s New Money Back Plan-20 years is so called Non-linked, Participating, Limited Premium, Individual, Life assurance plan which offers a combination of protection against death throughout the term of the plan along with the periodic payment on survival at a specific duration during the term.
Plan features and benefits:
This plan allows you to pay premiums for limited tenure while your plan coverage will continue for a longer period. i.e., in this plan you will pay a premium for 15 years, but your policy term will be 20 years.
Death benefits: If the policy holder demises during the policy term and all premiums are paid, then Sum assured + simple reversionary bonus + final additional bonus (if any) is paid.
Survival benefits: On survival, 20% of the sum assured is paid on 5th, 10th, and 15th year.
Maturity benefits: If the policy holder survives till the end of the policy term, 40% of sum assured + reversionary bonus + final additional bonus
(if any) is paid.
Participation in profits: Policy holders are allowed to participate in profits of the company. Final additional bonus is not paid for paid up policies.
Rider Benefits: There are four options available in this rider option by the payment of additional premium. A policy holder can avail maximum of three rider’s options under a policy. The options are LIC’s accidental death and disability benefit rider, LIC’s accident benefit rider, LIC’s new term assurance rider, LIC’s new critical illness benefit rider.
Settlement option for maturity benefit: This option is to receive the maturity benefit in installments over the chosen period of 5 or 10 or 15 years instead of lump sum amount under an in force as well as paid up policies.
Option to take death benefit in instalments: In this option the policy holder’s nominee can receive the death benefit in instalments over a chosen period of 5 or 10 or 15 years instead of lump sum amount under an in force as well as paid-up policy.
Other benefits such as grace period, revived, free look, surrender value, paid up value, rebate, loan, suicide exclusion can also be availed under this plan.
Source: https://licindia.in/Products/Insurance-Plan/LIC-s-NEW-MONEY-BACK-PLAN-20-YEARS-(UIN-512N280V)
Team Financial Wellness suggests not to choose LIC’s New Money Back Plan.
Forgoable Poor Returns – The one main reason you have to stay away from investing in Money Back plan. Team Financial Wellness has analyzed the plan and formulated the outcome in the following discussion.
Considering Sum assured of Rs.10,00,000/-, the premium is Rs.77,923 for a payment term of 15 years and a policy term of 20 years. The actual returns are calculated for 37 year old female. GST at the rate 4.5% is applicable on the premium for 1st year and 2.25% from 2nd year.
The policy holder is repaid with guaranteed returns of 4.49%.
Will you as a reader of Financial Wellness blog be happy with these returns? Definitely NO.
The policy holder gets tax benefit on the annual premium under Section 80C. However, the tax saving does not justify miniscule returns.
Financial wellness team can strongly state you that it’s better to pay tax instead of investing your hard-earned money on such plans. Returns are insignificantly low, covered under a leaf of two words “guaranteed ” and “Tax free”.
Team Financial Wellness is not recommending LIC New Money Back Plan. In fact, money back plans from all companies are similar and provide poor returns.
©Copyright of Karthikeyan Jawahar; 2021 and beyond. All Rights Reserved. Any modification or use for commercial purpose without prior written consent by Karthikeyan Jawahar is prohibited. This article is for knowledge sharing purpose and should not be deemed as an implementation plan. Contact Team Financial Wellness for a customized plan implementable for you.
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