LIC Bima Jyoti (Plan No.860) – Features, Benefits and Review

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LIC is launching a new plan Bima Jyoti Plan (Plan No.860) with effect from 22nd February 2021. It is usually a tax-saving season for many salaried. Considering this in mind, every year LIC launch such new plans. Let us see the features, benefits, and eligibility of this plan.

LIC Bima Jyoti (Plan No.860) is a Non-linked, Non-participating, Individual, Limited Premium Payment, Life
Insurance Savings Plan. Under this plan, Guaranteed Additions shall accrue at the rate of Rs.50 per thousand Basic Sum Assured at the end of each policy year throughout the policy term.

This plan is available in both ONLINE and OFFLINE mode.

LIC Bima Jyoti (Plan No.860) Eligibility

Let us now look into the eligibility of LIC Bima Jyoti (Plan No.860).

LIC Bima Jyoti (Plan No.860) Eligibility

Available riders in this plan are – Accidental Death and Disability Rider Benefit, Accident Benefit Rider, Term Assurance Rider, New Critical Illness Benefit Rider and Premium Waiver Benefit Rider.

Premium Payment Option – Yearly, Half Yearly, Quarterly and Monthly.

Loan is also available under this plan. After payment of premiums for at least two full year’s subject to the following conditions:
a) The maximum loan that can be granted as a percentage of surrender value are as under:
• For inforce policies – upto 90%
• For paid-up policies – upto 80%
b) The rate of interest to be charged for the loan amount would be determined by the Corporation from time to time.
c) The loan during the minority of Life Assured can be availed by the proposer provided the loan is raised for the benefit of the minor Life Assured.
d) In the event of default in payment of loan interest on the due dates and when the outstanding loan amount along with interest is to exceed the surrender value, the Corporation would be entitled to foreclose such policies. Such policies when being foreclosed shall be entitled to payment of the difference of surrender value and the outstanding loan amount along with interest if any.
e) In case the policy shall mature or surrendered or becomes a claim by death, the amount of
outstanding Loan together with all interest shall be recovered from the claim benefit
payment.

LIC Bima Jyoti (Plan No.860) Benefits

The benefits payable under this policy are as below.

Death Benefit

a) Before the commencement of Life Risk- On death during the policy term before the date of commencement of risk: Return of premiums paid excluding taxes, any. extra amount chargeable under the policy due to underwriting decision and rider premium(s), if any.

b) Death during the commencement of Life Risk – On death during the policy term after the date of commencement of risk: “Sum Assured on Death” along with accrued Guaranteed Additions Where “Sum Assured on Death” is defined as the higher of
• 125 % of Basic Sum Assured or
• 7 times of annualized premium
This death benefit shall not be less than 105% of all the premiums paid upto the date of death. Premiums referred above shall not include taxes, any extra amount chargeable under the policy due to underwriting decision and rider premium(s), if any.

Maturity Benefit

On the life assured surviving to the end of the policy term, “Sum Assured on Maturity” along with accrued Guaranteed Additions, shall be payable. Where “Sum Assured on Maturity” is equal to the Basic Sum Assured

Guaranteed Addition (GA) in LIC Bima Jyoti (Plan No.860)

This policy not offers any bonus. Instead a fixed GUARANTEED ADDITION at the rate of Rs.50 per thousand Basic Sum Assured shall accrue at the end of each policy year. In case of death under inforce policy, the Guaranteed Addition in the year of death shall be for full policy year. In case the premiums are not duly paid, the Guaranteed Additions shall cease to accrue under a policy.
In case of a paid-up policy or on surrender of a policy, the Guaranteed Addition for the policy
year in which the last premium is received (i.e. wherein full year’s premiums have not been
received) will be added on proportionate basis in proportion to the premium received for that
year.

LIC Bima Jyoti (Plan No.860) – Should you invest?

In India, to sell any products easily three things are important. They are SAFETY, TAX BENEFIT and GUARANTEED. This plan offers all these three features. However, at what cost? Let us see.

# In this plan the main highlight is GUARANTEED ADDITION of Rs.50 per Rs.1,000 SA. We feel great that in such a low-yielding Bank FD rates, LIC is offering us the GUARANTEED Rs.50 per Rs.1,000 Sum Assured. It is nothing but 5%. Also, such GUARANTEED ADDITION added each year to your policy will not earn additional interest. LIC will show it as yearly accumulated guaranteed addition. But as it is idle for the next 15 years or 20 years, its value will diminish drastically. Hence, never assume that your returns on investment is 5%. Instead, it may be around 4%. Let us take an example of Term 20 Yrs and Premium Paying Term 15 Yrs
Sum Assured Rs.10 Lakh, Age-30 Yrs (Premiums are inclusive of AB, DB and GST (4.5%). The yearly premium will be Rs.82,545 . The returns are less than 4%. Look at the below table.

LIC Bima Jyoti (Plan No.860) Returns Calculation

As I told above, even though you may feel LIC is giving us the GUARANTEED ADDITION of Rs.50 per Rs.1,000 Sum Assured, due to no additional returns to this GA, the end results will be less than 4%.

# But few may argue that it is tax-free. Hence, why not explore? I feel if you really looking for safety, tax benefit, and decent returns, then products like PPF or SSY (if you are thinking of this policy for your daughter’s educational or marriage goals) are far far better. Even though interest varies in these two products. However, if we compare the current rates, these two are far better than this product.

# If you are looking at this product as insurance, obviously it will not cover your life risk with a hefty premium. If you try to buy the Life Insurance coverage of around 15-20 times of your yearly income (The ideal life insurance one must have to protect his or her life risk), then you have to cough huge premium.

Conclusion:-Considering all these aspects, I repeat again which I am repeating since 10 years of my blogging journey – NEVER COMBINE INSURANCE WITH INVESTMENT. WHEN THE AVERAGE COST OF AGENT COMMISSION IS AROUND 6%, HOW CAN YOU EXPECT RETURNS BEYOND 5%? BUY A PURE TERM LIFE INSURANCE (Even LIC offers it online “LIC’s Tech-Term (No.854) – Online Term Life Insurance Review“) AND STAY AWAY FROM SUCH DUMMY PRODUCTS.If you still feel less than 4% returns for 20 years of your investment is the BEST, then don’t wait…Go ahead and buy it. Your agent will also be richer than you as without investment he will earn a decent around 6% returns for the next 10 or 15 years (as per your premium paying term). The best product for agents but not for investors 🙂

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Basu Nivesh

Basu Nivesh

Basav is a SEBI Registered Investment Adviser (SEBI RIA) practicing the Fee-Only Financial Planning Service. He is a CFP (Certified Financial Planner) and blogger at Basu Nivesh. He services around 300+ satisfied clients.
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