LIC has launched a new online term plan, LIC Tech Term Plan (Plan 854). It is a purely online plan and you cannot buy it from an agent. Due to this reason, this is cheaper than other term life insurance plans offered by LIC.
If you have been planning to buy a term plan (or you need to purchase a term insurance plan), then you can add this plan from LIC as part of your consideration. By the way, in case you do not have adequate life cover, go ahead and purchase coverage quickly. There is no point in trying to optimize your choice. Firstly, there is not much to differentiate between term plans. Secondly, what if something happens to you while you are still finalizing the plan?
In this post, let’s find out about LIC Tech Term Plan in detail.
LIC Tech Term (Plan no. 854): Salient Features
Level Sum Assured and Increasing Sum Assured
There are two Sum Assured options you can choose.
Under Level Sum Assured option, your life cover (Sum Assured) remains constant during the policy term.
Under Increasing Sum Assured, your life cover remains constant for the first five years. From the 6th policy year till the end of 15th policy year, your life cover will increase by 10% each year for the next 10 years i.e. the policy cover will double by the end of 15th policy year. From the 16th policy year till the end of the policy term, your life cover remains constant.
For instance, if you purchase a life cover of Rs 50 lacs for 20 years, your life cover will be Rs 50 lacs. From the 6th till the end of 15th year, it will increase by Rs 5 lacs each year (10% of 50 lacs). In the 6th year, the cover will be Rs 55 lacs. In the 7th year, the life cover will be Rs 60 lacs and so on. In the 15th policy year, the cover will increase to Rs 1 crore (double of initial cover of Rs 50 lacs). Thereafter, the life cover will remain constant at Rs 1 crore for the policy term.
In my opinion, the Level Sum Assured is a better choice. As an advisor, I find it difficult to incorporate an Increasing Sum Assured as part of planning.
How does the nominee receive the death benefit?
The death benefit can be paid out as lump sum or in instalments over 5, 10 or 15 years.
You do not necessarily have to specify this upfront. You can specify this anytime during the policy term. There is also an option to receive the part amount as a lump sum and the remaining in instalments.
While I have nothing against receiving the death benefit in instalments (income replacement term plans), LIC has not specified the interest rate it will use to calculate those instalment amounts. That leaves you with the interest rate risk (sort of). You are a captive customer. You will have to take whatever they give you. With other income replacement plans, the instalment amounts are specified upfront and the premium is modified accordingly.
With LIC Tech Term, the premium remains the same. The LIC keeps flexibility with itself.
Can I buy without the medical test?
You can buy LIC Tech Term Plan without undergoing medical examination (non-medical scheme) subject to meeting the following conditions.
If you are between 18 and 35 years of age and have annual income > 3 lacs, you can purchase life cover up to 75 lacs without undergoing medicals.
If you are between 36 and 45 years of age and have annual income > 5 lacs, you can purchase life cover up to Rs 50 lacs without medicals.
There are three kinds of premium rates:
Everything else being same, you can expect the following relationship.
Non-smoker rate > Smoker rate > Aggregator rate
Do note, the aggregator premium rate applies for the non-medical scheme. This means that the premium for smokers and non-smokers will be the same under the non-medical scheme.
Tip: If you are a non-smoker and are eligible for the non-medical scheme, you may still be better off applying under the regular scheme. You may have to pay a lower premium since you can get a non-smoker rate.
If you are a smoker, you can’t apply under Non-medical scheme.
A medical test is mandatory if you are applying for the non-smoker rate. Non-smoker rate is not available under the non-medical scheme.
What is the premium in LIC Tech Term Plan?
The premium will depend on your age, gender, policy term, premium payment term, and Sum Assured. It will also depend on your health status, application (medical/non-medical) and your smoking habits. The premium rates for females are lower than those for males.
I picked up the premium for a30-year old in Mumbai. Policy term of 30 years. Level Sum Assured. Regular premium payment.
A few points to note
The premium for females is lower than males.
If you are a smoker, your premium is higher.
If you are a non-smoker, the premium is higher is non-medical scheme as compared to the regular scheme. Compare quotes 2 and 4. Everything is same except that the applicant chooses the non-medical option under (2). The premium is Rs 9,912 while the premium is Rs 6,254 under regular scheme. If you are a non-smoker, do not opt for the non-medical scheme. The non-medical scheme is not available for smokers. In any case, it is better to go through a medical test before the purchase of the life insurance policy.
Comparison with term plans from private players
I copy the quotes from PolicyBazaar for a 30-year-old male residing in Mumbai. Sum Assured: Rs 1 crore. Policy Term: 30 years. Premium Payment Term: 30 years (regular premium payment).
The premium in LIC Tech Term will be Rs 11,007.
So, the LIC Tech Term plan is still a bit expensive than plans from private players. You can check for your age and requirement and compare. At the same time, LIC Tech Term is much cheaper than the previous online plan from LIC, LIC e-term.
At the same time, term life insurance is also about peace of mind. If you trust LIC more, go ahead and purchase this plan (assume you do not have adequate life cover).
Note that your life insurance claim cannot be rejected if your policy is over 3 years old. This rule applies to both LIC and private players.
How to purchase LIC Tech Term Plan?
LIC Tech Term is a purely online term life insurance plan. Therefore, you cannot buy it from an agent or a distributor.
You can buy the plan online from the LIC website (https://eterm.licindia.in/onlinePlansIndex/login.do).
Follow steps. You will have to enter your details. You will get an OTP. Enter OTP. Choose the coverage amount and other details and proceed with the application.
Deepesh Raghaw is a SEBI registered investment advisor and founder of www.PersonalFinancePlan.in. Read the original article.
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