Life Insurance Corp's Bima Account I & II

Life Insurance Corporation of India (LIC) has recently launched two products under the new variable insurance regime. Often, insurance companies position these products (earlier called universal life plans) as hybrid versions of traditional endowment plans and Ulips . Essentially, they are non-linked, traditional products with some amount of flexibility built into them. LIC has come up with variable insurance schemes - Bima Account I and II. No medical examination of the policyholder is required under the former.

Sum Assured

Under Bima Account I, the minimum and maximum sum assured could range from 10 to 20 times the annual premium, depending on the policyholder's age. The policyholder is also allowed to reduce the sum assured, subject to the minimum limit. If the insured survives the policy term, the balance in the policyholder's account will be payable. In the event of his/her demise during the tenure, the dependent will get the sum assured along with the balance in account.

Premiums and returns

Under the two plans, premium paid will be credited to the policyholder's account, post deduction of charges. Rate of return will be at least 6% per annum, provided all premiums are paid. The minimum annual premium payable under Bima Account I is `7000, while it is `15,000 under Bima Account II. One can also choose to pay top-up premiums, without any increase in the protection cover to the extent of total basic premiums paid under the policy.

REVIVAl

Any failure to pay premiums within the grace period will result in the policy turning into a paid-up one. It can be revives within 12 months from the date of the first unpaid premium.

Charge Structure

In the first year, 27.5% of the premium amount will be directed towards expense charges. This will come down to 7.5% in the second and third years, and further to 5% in the subsequent years. Top-up premiums will attract an expense charge of 2.5%. Though the structure is compliant with Irda norms, financial planners feel the charges are still quite high.

Upside

Charges are transparent and in line with Irda's new guidelines. Policyholder can also borrow against the policy after first year.

Downside

While you can reduce the sum assured, there is no provision to increase the same. Also, no rider benefits are attached to this plan.