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 gives guaranteed addition at a charge of Rs 50 per thousand (i.e. Rs 5 per 100 or 5 per cent) Basic Sum Assured on the finish of every coverage 12 months all through the coverage time period.
Policy Term & PPT
The Policy Term of the plan varies from 15 to twenty years and the Premium Paying Term (PPT) might be 5 years lower than the respective Policy phrases. That is for a 15-year coverage time period, the PPT might be 10 years and for 16-year coverage, the PPT might be 11 years and so forth.
Sum Assured Limits
The minimal Basic Sum Assured is Rs 1 lakh and a number of of Rs 25,000 thereafter, with no most restrict.
The minimal age at entry allowed is 90 days (accomplished) and the utmost age at entry could also be 60 years (nearer birthday, whereas the minimal age at maturity might be 18 years (accomplished) and the utmost age at maturity might be 75 years (nearer birthday) .
While main banks now providing Fixed Deposit (FD) charges of round 5-6 per cent each year, Rs 50 per thousand Basic Sum Assured guaranteed addition would generate greater return and that too tax free, because the calculation might be carried out on the quantity of Basic Sum Assured and never on the quantity of premium.
For instance, for a 30-year outdated particular person choosing Rs 10 lakh Basic Sum Assured for a coverage time period of 15 years, the annual premium – to be paid for 10 years – might be Rs 82,545. In this case, the guaranteed addition might be Rs 50,000 per 12 months for 15 years or Rs 7,50,000 on maturity.
The complete maturity worth would be the complete guaranteed 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 fee of Rs 82,545 to start with of every year for 10 years and the maturity worth of Rs 17,50,000 on the finish of fifteenth 12 months could be 7.215 per cent.
As the return is tax free, will probably be equal to over 10.31 per cent taxable FD interest for a person within the 30 per cent tax bracket and 9.02 per cent for a person within the 20 per cent tax bracket.
Moreover, alongside with a lovely charge of return, LIC Bima Jyoti additionally gives life cowl.
However, because the guaranteed annual addition stays equal yearly and never compounded, the annual compound charge of return or the IRR would cut back with enhance within the coverage time period.
Moreover, because the premium will increase with age, the return might be greater with decrease entry age of a life assured, whereas the return might be decrease with greater entry age.