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Review: LIC Saral Jeevan Bima – Positive and Negative Factors

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In recent years, it has been noticed that there is an increase in the preference of the customers when it comes to the pure term life insurance products. Keeping in mind the growing demand, innovative protection products have been introduced by the life insurers with different features, benefits, riders, options, and so forth.

LIC has launched Saral Jeevan Bima, which is a standard term insurance plan that covers basic term plan features and starts with a low sum assured of 5 Lakhs. This plan is launched based on IRDA guidelines about launching a standard term plan which would have common features. There is a mixed reaction to this plan. Some say the good plan, some comment, fewer features.

Q1: What are the Positive Features in LIC Saral Jeevan Bima?

Q2: What are some of the negative and hidden factors which you should be aware before opting for Saral Jeevan Bima LIC,  a standard term insurance plan?

Overview about LIC Saral Jeevan Bima – Standard Term plan

Earlier Max Life has launched Saral Jeevan Bima. Now LIC has launched LIC Saral Jeevan Bima, a simple and standard term insurance plan that has pure risk coverage. LIC Saral Jeevan Bima Plan 859 provides pure risk coverage without any restrictions on providing documentation while taking the plan.

Now let us look at the positive features and negative factors in the Saral Jeevan Bima Plan of LIC.

What is the Standard Term Life Insurance Product?

The standard individual term life insurance product will be called the ‘Saral Jeevan Bima’. The name of the insurer will be prefixed to the name of the product.

The life insurers are allowed to transact the new business and offer the standard term insurance product the ‘Saral Jeevan Bima’ from 2021, January 01. The product could be filed by the insurers by 2020, December 01. The insurers could also file the product earlier and then offer the same upon approval before 2021, January 01.

Saral Jeevan Bima

Standard Term Insurance Plan

What is it?

It is the simple insurance policy that will pay the nominee a fixed amount after the death of the policyholder

Why should you buy?

  • Simple and easy to understand
  • Standardized wordings
  • Choosing becomes easy as all life insurance companies offer the same product

LIC Saral Jeevan Bima – What are the Positive Features?

Here are major positive features of this term plan.

1) Simple Term Plan

This is a simple term plan without complicating with any T&C. LIC Saral Jeevan Bima Plan provides pure risk coverage. In case of death of the policy holder, the nominee would get sum assured on death.

2) Sum Assured as low as 5 Lakhs

Generally term plans start from Rs 25 Lakhs sum assured onwards. However, this standard term plan comes with a low sum assured. LIC Saral Jeevan Bima sum assured is 5 Lakhs to 25 Lakhs. Means even a low income earner can take this term plan based on their need.

3) No documents to be provided

Generally to issue a term plan, the insurance company keeps asking for income proofs and educational proofs. However to take this term plan, one need not submit any educational or income proofs.

4) Premium payment Term

There is a flexible premium payment term of 5 years to 40 years. One can consider flexible payment options based on their convenience.

5) Age of entry – 18 years to 65 years

One can consider this term plan who is in the age group of 18 years and up to 65 years of age.

6) Coverage up to 70 years

Saral Jeevan Bima plan from LIC would have risk coverage of insurance up to 70 years of age.

7) Options in premium payment

This insurance plan also comes with 3 types of premium payment variants. One can consider the single premium option, limited premium payment option and regular premium payment option.

Under a single premium plan, policy holder would pay the premium only once (single) and have the risk coverage till the tenure of the policy e.g. 30 years or 40 years.

In the limited premium option, individuals can pay a premium for 5 years or 10 years but have the life risk coverage till the entire tenure of the policy. E.g. 30 years or 40 years, depending on the option chosen by the policyholder.

Under the regular premium plan, one can pay premium either by monthly, quarterly, half yearly or yearly.

8) Death Benefit

In case of death during the policy tenure, the nominee would get death benefit which is equivalent to sum assured on death. However, if death happens within 45 days from the date of the policy, only premiums paid would be returned by LIC.

9) Rebate of High Sum Assured

LIC provides rebate (discount) on insurance premiums for a high sum assured of more than Rs 9.5 Lakhs. This rebate ranges between 0.1% to 0.25% of basic sum assured. Here is the chart of high sum assured rebate based on the sum assured.

10) Rebate for online purchase of policy

LIC provides rebates (discounts) on insurance premium for online purchase of this plan. Such rebate is between 2% to 7%. Here is the chart showing the rebate based on the basic sum assured.

11) Income Tax Benefits

Insurance premiums paid for this term plan would qualify for income tax rebate u/s 80c of income tax act, up to Rs 1.5 Lakhs during the financial year.

LIC Saral Jeevan Bima – What are the Negative Factors?

Here are some of the negative or less known factors.

1) No Riders

This is a simple term plan that does not have riders. There are several term insurance plans that comes with critical illness riders (e.g. ICICI iSmart Term Plan or HDFC Click 2 Protect 3D Plus).

2) Death within 45 days

If the policyholder dies within 45 days (due to other than accident), the nominee would get a refund of premiums only. This is similar to the waiting period in health insurance plans or life insurance plans to get risk coverage.

3) Coverage up to 70 years only

If there are any dependents (e.g. Spouse), one wants to take risks coverage for longer-term or lifelong. However, this policy would cover only up to 70 years only. We reviewed earlier LIC Jeevan Umang’s whole life insurance plan that covers for entire life.

4) Modal Loading charges

There is a loading charges i.e. Increase in premium for regular and limited premium payment if the policy holder chooses monthly or half yearly premiums. These are called modal loading charges. One needs to pay 3% and 2% higher premium respectively.

Why the Need for Standardized Policy?

Today, there are a plethora of term insurance products easily available in the market with different terms and conditions. When it comes to making an informed choice, it is expected from the customers to devote sufficient energy and time to make the right selection of the product. Besides, the products might not be accessible for the sum assured intended.

How to detail that Situation?

To deal with such a situation and to make accessible the product by all the life insurers that would meet the requirements of an average customer, a need was felt to introduce the standard and individual term life insurance product with standard terms and conditions and simple features.

Such a product will help the customers to make an informed and wise choice and the trust will also be enhanced between the insurer and the insured. This will also lead to reductions in the misselling and potential disputes during claim settlement.

Exercising the powers of the Insurance Act within Section 34(1) (a), the life insurers have been directed to offer the standard term life insurance product mandatorily.

Salient Features of Saral Jeevan Bima

In the below table, let us understand the features and parameters of the Saral Jeevan Bima:

ParticularsNorms
Large Sum Assured RebateIn case of anything, it will be indicated with ‘File and Use’
Options of Premium PaymentSingle-premium
Regular Premium
Limited Premium Payment for a 5-years or 10-years term
Premium Payment ModeSingle-premium: In a lump sum
Limited and Regular Premium Payment: Yearly or half-yearly and monthly (only within NACH/ECS)
Death BenefitFor the Single-premium policy: Higher of 125 percent of the single-premium and absolute amount assured that will be paid upon the demise

For Limited and Regular Premium Payment policy: Highest of 10 times of the AP, absolute amount assured that will be paid upon demise or 105 per cent of the paid premiums as on the date of demise
Maturity BenefitNo maturity benefit under this policy
Warning Period45-days from the date of the beginning of risk. In case the policy has been revived, the waiting period will not be applicable

The policy will provide death coverage due to accident only during the 45 days waiting period from the date of commencement of risk. If the life assured dies due to an accident during the waiting period then an amount equal to 100% of the premium paid excluding the taxes will be paid to the nominee and no sum assured amount will be paid. The plan will be nullified in case the life assured commits suicide within 12 months from the date of commencement of risk
ExclusionsAs per the extant regulations, only suicide clause
Surrender ValueNo surrender value within this policy
LoanNo loan will be permitted against the policy
Policy Cancellation ValueThe policy cancellation value will be payable:

When the policyholder applies for the equivalent before the date of maturity stipulated in case of the single-premium policy

When the policyholder applies for the equivalent before the date of maturity stipulated or the end of the revival term when the policy has not been revived in case of the limited premium payment policy
PricingAs per the ‘File and Use’
Optional RidersAn approved accident benefit and the permanent disability riders could be attached

The riders are add-on coverage offered by the policy to enhance the coverage of the policy. The policyholder can add rider options to the base plan by paying an extra premium along with the basic premium of the policy. The rider sum assured will be the assured amount payable in case of any specific event covered under the rider happens and opted by the policyholder
Interest Upon Delayed PremiumsAs per the policy of the insurer for similar product
Medical Requirements and UnderwritingAs per a Board Approved Underwriting Policy of an insurer and also subject to the criteria above and other statutory requirements

Conclusion: If you are a low income earner or at the beginning of your career and looking to take a term insurance plan, you can go for LIC Saral Jeevan Bima Plan. LIC charges a little higher premium compared to private insurance companies, owning to its trusted brand. One can consider such plans through online mode so that they can get lower premiums through high sum assured rebate (if possible) and separate rebates for online purchases.

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