LIC’s Micro Bachat Plan: LIC offers several plans that provide both insurance protection and attractive returns. One such option is the Micro Bachat Plan. This plan allows you to secure insurance coverage for up to 15 years with an annual premium of approximately Rs 12,000, which breaks down to just Rs 1,000 per month. Policyholders can benefit from loyalty additions according to the plan’s terms, potentially achieving returns of up to 6% based on these additions. However, it’s important to note that there are some restrictions, including a maximum policy limit of Rs 2 lakh under this plan.

 

LIC’s Micro Bachat Plan: Key Features

The Micro Bachat Plan from LIC is a non-linked, participating, individual life micro-insurance savings plan. It allows individuals aged 18 to 55 to take out a policy ranging from Rs 1 lakh to Rs 2 lakh.

You can select a premium payment period of 10 to 15 years, and the maturity amount will be paid out after the completion of the Premium Payment Term (PPT).

The maturity amount you receive is influenced by how long you maintain the policy, as Loyalty Additions (LA) accumulate over that time. It’s worth noting that Loyalty Additions only start accruing after five years, so if you surrender the policy before that period, you will not receive any Loyalty Additions.

 

In terms of the death benefit, if the policyholder passes away within the first five years, the nominee will receive an amount equal to the sum assured. If death occurs after five years, the nominee will receive the sum assured plus any loyalty additions. The sum assured is determined as the greater of the basic sum assured or seven times the annual premium.

 

Investments in this plan qualify for tax deductions under Section 80C in the old tax regime, and the maturity proceeds are tax-exempt under Section 10(10D).

 

Additionally, riders such as ADDB (Accidental Death and Disability Benefit), AB, AB (2x), and AB (3x) are available with this plan.

 

Understand with an example

 

Let’s assume a 55-year-old purchases a policy worth Rs 2 lakh under this plan. His annual premium would be Rs 12,066, half-yearly Rs 6,096, quarterly Rs 3,080, or monthly Rs 1,027. After paying premiums for 15 years, he would receive a return of Rs 2.65 lakh based on the current loyalty additions. Currently, LIC is offering a loyalty addition of Rs 325 for every Rs 1,000 of sum assured. This results in an annual return of 5.1%. Note that the premium calculation here includes ADDB riders.

 

Now, let’s assume a person took out a policy at age 18. With ADDB riders, the annual premium would be Rs 10,360, half-yearly Rs 5,235, quarterly Rs 2,645, or monthly Rs 882. After paying premiums for 15 years, the current loyalty additions would yield a return of Rs 2.65 lakh. This translates to an annual return of up to 6.7%.