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LIC's Micro Bachat Plan: LIC offers certain plans that provide good returns alongside insurance coverage. One such plan is the Micro Bachat Plan. It allows policyholders to secure insurance coverage for up to 15 years with an annual premium of approximately ₹12,000—translating to just ₹1,000 per month. Policyholders receive 'Loyalty Additions' subject to specific conditions, and based on current rates, the plan can yield returns of up to approximately 6%. However, there are limitations; for instance, the maximum policy cover that can be purchased is ₹2 lakh.

LIC's Micro Bachat Plan: Key Features

LIC's Micro Bachat Plan is a non-linked, participating, individual life, micro-insurance savings plan.

Policies ranging from ₹1 lakh to ₹2 lakh can be purchased by individuals aged between 18 and 55 years.

A premium payment term of 10 to 15 years can be selected, and the maturity proceeds are payable after the premium payment term (PPT) concludes.

The maturity amount depends on the policy tenure, as Loyalty Additions (LA) accrue based on the duration of the policy. Loyalty Additions begin to accrue only after 5 years; therefore, surrendering the policy before this period means no Loyalty Additions will be received.

Regarding death benefits: in the event of the policyholder's death within the first five years of the policy, the nominee receives an amount equal to the Sum Assured. If death occurs after 5 years, the nominee receives the Sum Assured plus the accrued Loyalty Additions. The 'Sum Assured' is defined as the higher of the Basic Sum Assured or seven times the annual premium. Investments made in this plan qualify for a tax deduction under Section 80C (under the old tax regime), while the maturity proceeds are tax-free under Section 10(10D).

Riders such as ADDB (Accidental Death and Disability Benefit), AB, AB (Double), and AB (Triple) are available with this plan.

Let’s understand this with an example:

Suppose a 55-year-old individual purchases a policy worth ₹2 lakh under this plan. The premium would be ₹12,066 annually, ₹6,096 half-yearly, ₹3,080 quarterly, or ₹1,027 monthly. After paying premiums for 15 years, the return would amount to ₹2.65 lakh, based on current loyalty addition rates. Currently, LIC offers a loyalty addition of ₹325 per ₹1,000 of the sum assured. This translates to an annual return of approximately 5.1%. Note that this premium calculation includes the ADDB rider.

Now, consider an individual who purchases the policy at the age of 18. With the ADDB rider, the premium would be ₹10,360 annually, ₹5,235 half-yearly, ₹2,645 quarterly, or ₹882 monthly. After paying premiums for 15 years, the return would be ₹2.65 lakh, based on current loyalty addition rates. This indicates an annual return of up to 6.7%.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.