The Life Insurance Corporation (LIC) of India has launched Bima Jyoti – a Non-linked, Non-participating, Individual, Limited Premium Payment, Life Insurance Savings Plan – that provides assured addition at a price of Rs 50 per thousand (i.e. Rs 5 per one hundred or 5 per cent) Basic Sum Assured at the finish of every single policy year all through the policy term.
Policy Term & PPT
The Policy Term of the program varies from 15 to 20 years and the Premium Paying Term (PPT) will be 5 years much less than the respective Policy terms. That is for a 15-year policy term, the PPT will be 10 years and for 16-year policy, the PPT will be 11 years and so on.
Sum Assured Limits
The minimum Basic Sum Assured is Rs 1 lakh and numerous of Rs 25,000 thereafter, with no maximum limit.
Age Limits
The minimum age at entry permitted is 90 days (completed) and the maximum age at entry may perhaps be 60 years (nearer birthday, though the minimum age at maturity will be 18 years (completed) and the maximum age at maturity will be 75 years (nearer birthday) .
Return Comparison
While major banks now supplying Fixed Deposit (FD) prices of about 5-6 per cent per annum, Rs 50 per thousand Basic Sum Assured assured addition would produce greater return and that also tax no cost, as the calculation will be accomplished on the quantity of Basic Sum Assured and not on the quantity of premium.
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Guaranteed Addition
For instance, for a 30-year old person opting for Rs 10 lakh Basic Sum Assured for a policy term of 15 years, the annual premium – to be paid for 10 years – will be Rs 82,545. In this case, the assured addition will be Rs 50,000 per year for 15 years or Rs 7,50,000 on maturity.
Return Calculation
The total maturity worth will be the total assured addition of Rs 7,50,000 plus the Basic Sum Assured of Rs 10,00,000 (Rs 7,50,000+Rs 10,00,000) or Rs 17,50,000. So, the compounded annual return or the Internal Rate of Return (IRR) – with premium payment of Rs 82,545 in the starting of every single year for 10 years and the maturity worth of Rs 17,50,000 at the finish of 15th year would be 7.215 per cent.
Tax-no cost Return
As the return is tax no cost, it will be equivalent to more than 10.31 per cent taxable FD interest for an person in the 30 per cent tax bracket and 9.02 per cent for an person in the 20 per cent tax bracket.
Life Cover
Moreover, along with an eye-catching price of return, LIC Bima Jyoti also supplies life cover.
Return Parameters
However, as the assured annual addition remains equal just about every year and not compounded, the annual compound price of return or the IRR would lower with raise in the policy term.
Moreover, as the premium increases with age, the return will be greater with decrease entry age of a life assured, though the return will be decrease with greater entry age.