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LIC Bima Ratna Plan No 864 – How good or bad is this plan?

LIC Bima Ratna Plan No 864 – How good or bad is this plan-

LIC has launched a new money back plan, Bima Ratna policy. While this insurance plan provides life risk coverage, it also provides periodic payments during the policy term at the end of the policy tenure. This plan is simple to understand, unlike its recent plans which has complicated features and difficult to choose. Should you opt LIC Bima Ratna Plan No 864? What are the negative factors in this plan?

Features of LIC Bima Ratna Plan No 864

LIC offers several life insurance plans, riders, health insurance plans etc. Bima Ratna is the new plan launched on 27th May, 2022.  Here are the major features of this plan.

  • This is non-linked, non-participating, individual, life insurance savings scheme.
  • In case of unfortunate death of the life insured, nominee / family members would get the basic sum assured indicated in the policy.
  • This policy offers guaranteed additions during the policy term. It ranges between Rs 50 per thousand sum assured of Rs 60 per thousand sum assured which would depend on the tenure of the policy.
  • In case of survival of the policy holder, they would get 25% of basic sum assured each for 2 times in the last 3 years of the policy tenure.
  • On maturity of the policy, Sum Assured on Maturity would be paid to the policy holder.
  • Settlement Option provides policy holder to get the maturity amount in equal installments for 5 years.
  • This plan comes with limited regular premium payment option. One needs to pay premiums for policy tenure minus 4 years. Such premiums can be paid yearly, half yearly, quarterly or monthly.
  • It offers rebates on the premium up to 2% of the tabular premium.
  • It also offers a high sum assured rebates on the sum assured above Rs 10 Lakhs.

Benefits in LIC Bima Ratna

Here is the list of benefits available in this insurance policy.

#1 – Death Benefit

In case of unfortunate death of the life insured, highest of the following would be paid as a death benefit:

  • 125% of Basic Sum Assured (BSA)
  • 7 times of yearly premium
  • 105% of the total premiums paid till the date of the death of the life insured

In case of the death of the policy holder who is minor < 8 years and before commencement of risk, only total premiums paid till date would be refunded as a benefit. No other death benefit would be paid.

#2 – Guaranteed Additions (GA) Benefit

This insurance policy offers guaranteed additions as long as the premiums are paid. Guaranteed Additions (GA) would be as follows:

  • Rs 50 per thousand sum assured – 1st to 5th year of the policy term (5%)
  • Rs 55 per thousand sum assured – 6th to 10th year of the policy term (5.5%)
  • Rs 60 per thousand sum assured – 11th to 25th year of the policy term (6%)

#3 – Maturity Benefits

If the life insured is survived till the end of the policy term, maturity benefit which is equal to “Sum Assured on Maturity” along with Guaranteed Additions would be paid.  Sum Assured on Maturity = 50% of Basic Sum Assured.

#4 – Survival Benefits

During the survival period, LIC Bima Ratna Survival Benefits would be paid in the last 3 years of the policy term.

  • In case of 15 year plan – 25% of BSA paid on 13th year and 14th year
  • In case of 20 years plan – 25% of BSA paid on 18th year and 19th year
  • In case of 25 years plan – 25% of BSA paid on 23rd year and 24th year

Sample Premiums in Bima Ratna

Policy Term in Years (Premium Paying Term)
Age 15 (11) 20 (16) 25 (21)
20 2,16,040 1,51,066 1,14,218
30 2,16,824 1,52,340 1,16,178
40 2,20,744 1,57,534 1,22,940
50 2,32,602 1,71,548

Rebates / discounts on premium in LIC Bima Ratna

Mode Rebate
Mode Rebate
Yearly 2% of tabular premium
Half Yearly 1% of tabular premium
Quarterly/Monthly Nil
High Sum Assured Rebate
Basic Sum Assured (BSA) Rebate – Rs 1,000 BSA
5 Lakhs to 9.75 Lakhs Nil
10 Lakhs to 14.75 Lakhs 0.50
15 Lakhs to 19.75 Lakhs 1.00
20 Lakhs and above 1.25

LIC Bima Ratna explained with an example

Let me explain this with illustration for better understanding.

  • Mr. Mahesh aged 30 plan to take Bima Ratna plan for a 25 year tenure and annualized premium works out to Rs 1.16 Lakhs.
  • Policy Holder needs to pay a premium every year for 21 years of this 25 year policy tenure.
  • Since he opted 25 year plan, guaranteed additions would be 5% for 1 to 5 years, 5.5% for 6 to 10 years and 6% for 11 to 25 years.
  • He would get survival benefit of 25% of basic sum assured each on 23rd year and 24th year.
  • On maturity, he would get the maturity benefit of 50% of basic sum assured.
  • XIRR works out to be 4.8%. Here are the computations.

LIC Bima Ratna - Example

Why to invest in LIC Bima Ratna Plan?

Here are some positive factors in this plan.

  • This LIC Bima Ratna is simple to understand. It has minimum features that too without any confusion.
  • This plan comes with guaranteed additions of 5% to 6% per annum, however these are paid on maturity.
  • Survival benefit of 25% of basic sum assured is paid in two lots in the last 3 years of the maturity of the policy.
  • Settlement Option helps individuals to take maturity amount in installments for 5 years instead of a single lump sum.
  • This plan comes with optional riders like LIC Accident Benefit Rider, Premium Waiver Benefit Rider etc.,

Why NOT to invest LIC Bima Ratna Plan?

Here are some negative factors:

  • This plan comes with optional riders. However, such insurance riders come with additional premiums.
  • If you observe, the sales brochure indicates that this plan is aimed to float through banking partners. Unless you understand complete negative factors, you should not get influenced by bank managers or staff.
  • This is a life insurance savings plan and such plans offer low returns between 4.5% to 5.5%.

Should you invest in LIC Bima Ratna Plan No 864?

Bima Ratna Policy is simple to understand. This policy provides life risk coverage, guaranteed additions benefit, survival benefit and maturity benefits. The returns would depend on the age of the life insured and policy tenure.  Such insurance savings schemes, offer lower returns and range between 4.5% to 5.5%. Investors should understand whether they are comfortable with such low returns which does not beat inflation. LIC has several plans that offer high returns up to 6.5%. One can opt for such plans instead of Bima Ratna.

Alternatively, one can opt for a simple low cost term insurance plan and invest the balance in a mutual fund that can generate better returns.

Suresh KP

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