Introduction:

LIC New Money Back policy-25 years is a participating plan which is non-linked to share market investments. It participates in the profits/bonus declared by the company. Hence it is a prudent investment cum insurance option available to a large segment of age groups eligible to take the plan.

Who Should Invest in LIC New Money Back Policy:

Being a money back plan it entails least burden to finance the policy during its tenure which is also not 25 years but only 20 years as the premium paying term under the plan is only 20 years. The plan is beneficial to those persons who want to receive periodical payments during the term of the policy as survival benefits. Besides above the death cover provides benefit of sum assured payment to nominee if policy holder dies during the term of the policy.

Thus, providing financial support y at the time the family at the time it needs the most. There is loan facility also in the policy which provides for liquidity needs of the family at any time during the term of the policy after it has acquired surrender value.

How LIC New Money Back Policy works :

Any person between 13 years of age and up to 45 years of age can take the policy. Since it is a 25 year policy age at entry plus term becomes the age at maturity for example a child of 13 years will get the policy up to 38 years(13+25=38) and a person of 45 years will get the policy maturing at 70 years(45+25=70).

Minimum sum assured for which the policy can be taken is Rs.1 lakh with no maximum limit. For this policy of 25-year term the premium payment is limited to 20 years only. Further four survival benefits will be received during this 20-year period.

The unique selling proposition of this policy is that it covers the full risk of the life assured even when he receives periodical survival benefits after 5,10,15 and 20 years of the policy at the rate of 15% of the sum assured for each survival benefit, which means he will be having lesser burden to maintain/ finance his policy as the survival benefits received will be substantial support to sustain his policy as well as survival benefit payments after every five years being a financial support for his financial needs. Even after receiving survival benefits the insurance covers remains for the full sum assured till the maturity of the policy.

Key features of LIC New Money Back policy:

  1. This policy is a money back plan with 20 years premium paying term and 25 years policy term for maturity that is premium paying term is lesser than the term of the policy implying that 5 years more risk cover is available.
  2. 15% of the sum assured under the policy is paid as survival benefit on the policy holder surviving 5th ,10th, 15th and 20th year of the policy. Thus, the policy receives 60% of the sum assured as survival benefits.
  3. The remaining 40%of the sum assured is paid at the time of maturity of the policy along with simple reversionary bonus and final additional bonus.
  4. Policy holder has an option to take additional accidental and disability benefit cover by paying nominal extra premium which gives him additional sum assured as accidental benefit cover and disability cover, in addition to the natural death cover already provided under the policy.

Benefits offered under the LIC New Money Back policy:

  1. Death Benefit:
    When a policy holder dies during the term of the policy the nominee will be paid higher of the following two amounts:
    1. 125% of the basic sum assured.
    2. 10 times of the annualised premium.
    The higher of the two above amounts becomes sum assured at death and to this sum will be added the simple reversionary bonus and final additional bonus earned under the policy till date of death.
  2. Survival benefit:
    On survival at various stages during the term of the policy the policy holder will be paid survival benefits as follows:
    1.At the end of five years of the policy term 15% of the sum assured under the policy will be paid as first survival benefit.
    2.At the end of 10th year of the policy term 15% of the sum assured under the policy will be paid as second survival benefit.
    3. At the end of 15th year of the policy term 15% of the sum assured under the policy will be paid as third survival benefit.
    4. At the end of 20th year of the policy term 15% of the sum assured under the policy will be paid as fourth survival benefit.
  3. Maturity Benefit:
    Maturity benefit will be payable on the policy holder surviving 25 years that is full term of the policy. He will then get 40% of sum assured under the policy plus simple reversionary bonus and final additional bonus accrued under the policy as maturity benefit. This benefit is after he has already received 60% of sum assured during the term of the policy as survival benefits as stated above.
  4. Optional benefits: policy holder can opt for accidental and disability benefit rider by paying nominal additional premium for which he will get additional accident and disability benefit cover. In case he opts for this benefit he will be paid additional accidental sum assured which will be in addition to the basic sum assured under the plan. It is always advisable to opt for these riders/benefits as it comes as a rider with very less additional premium if we compare it with taking separate accidental cover through a term insurance or a separate policy. In case of accidental permanent disability arising due to accident (within 180 days of the date of accident) the amount equal to accident benefit sum assured will be paid in equal instalments spread over 10 years and future premiums for accident benefit sum assured as well as premium for the portion of basic sum assured shall be waived.
  5. Accident benefit rider is available subject to these conditions:
    Minimum sum assured one lakh.
    Maximum sum assured one crore across all the policies of the same life assured.
    Accident benefit can be taken any time during the term of the policy.
    Maximum maturity age for this benefit is 70 years.

Surrender Value of LIC New Money Back Policy:

This policy can be surrendered at any time when the policy has run for a minimum period of three years as that is the period when a policy acquires a surrender value. Any survival benefits already paid will be deducted from the surrender value while paying the amount to the policy holder. However it is always advisable not to surrender the policy (unless there is an financial emergency or is unavoidable) as a substantial amount is deducted for terminating the policy contract before completion of its stipulated term. For example, if a policy holder surrenders his policy after it has run for four years he will get approximately 50% of the premiums paid less premiums paid for riders to arrive at the surrender value to be paid. Percentage of vested bonus till the date of surrender will also be paid.

Tax benefits under LIC New Money Back plan:

  1. Premium paid under this plan is eligible for exemption under section 80 (c ) of the income tax act. The maximum exemption of Rs.1.5 lacs can be availed under this section of income tax act.
  2. Survival benefits: Survival benefits paid under the policy does not attract income tax
  3. Maturity: The amount of maturity benefit received under this plan is exempted under section 10(D) of income tax act. The sum assured should be at least 10 times the premium paid to be eligible for exemption under this section.
  4. Death Claim: there is no tax liability on death claim paid under the plan irrespective of the amount paid.

Loan Facility offered under LIC New Money Back plan:

Loan facility is also available under this policy once it acquires surrender value that is it has completed three policy years.

What happens if LIC New Money Back policy lapses:

The policy lapses if the premium is not paid with the days of grace of 30 days for quarterly, half yearly and yearly mode and 15 days for monthly mode of payment of premium, death claim is not payable subject to other conditions including the number of years the policy has run before it lapses due to non-payment of premium. Therefore, it is of utmost importance that premiums are paid by due date or at the most within the days of grace.

What happens if LIC New Money Back policy holder dies:

If the life Assured dies during the term of the policy Death Benefit would be payable. It would be Sum Assured plus vested bonus accrued under the policy till the date of death plus final additional bonus.

What happens if LIC New Money Back policy is closed before time:

If policy is closed before time that is before all the premium due are paid there are two situations:

  1. If policy is closed before three yearly premiums are paid it does not acquire any paid-up value and it lapses due to non-payment of premium and nothing is payable.
  2. However, if at least three full years premiums are paid and any subsequent premium is not paid non-forfeiture regulation operates and policy is not wholly void but the sum assured shall be proportionate to the premiums paid and such value is payable to the policy holder.
  3. Bonuses are payable only up to the period the premiums are paid and on death or maturity the reduced sum assured along with the vested bonus is paid.

Free Look Period offered for LIC New Money Back plan:

In the event of the policy holder finding any of the policy condition not according to what was explained by the agent or company representative or he finds certain conditions not suited to him he can return the policy within 15 days of its receipt to the office of the company.