The LIC New Money Back Plan 720 (Plan No. 720) is a popular life insurance product offered by the Life Insurance Corporation of India (LIC). This plan combines both life insurance protection and savings in one, making it an ideal choice for individuals seeking financial security while also planning for future financial needs. The product’s name, “Money Back,” signifies its unique feature of periodic payments during the policy term. These payments, which are typically made every few years, are designed to meet the policyholder’s liquidity requirements at different life stages, while providing life coverage at the same time.
In this article, we will provide a detailed explanation of the LIC New Money Back Plan 720, including its features, benefits, eligibility criteria, and an example to demonstrate how the plan works.
1. Introduction to LIC New Money Back Plan 720
The LIC New Money Back Plan 720 is a traditional, non-linked, with-profits endowment policy, which means it is designed to offer financial protection against death throughout the policy term and a survival benefit at periodic intervals. This plan provides money back benefits, where a percentage of the sum assured is paid back at specified durations during the policy term. The plan is also a participating policy, which means that it is eligible for bonus declarations, adding to the benefits accrued over the years.
The plan is primarily intended to provide a combination of risk cover and investment, with periodic payouts during the policy term, making it suitable for individuals who want to meet future financial needs like funding children’s education, marriage, or a down payment for a house.
2. Key Features of LIC New Money Back Plan 720
Let’s go through the most important features of the LIC New Money Back Plan 720:
a. Policy Term
The policy term for the LIC New Money Back Plan 720 ranges from 20 to 25 years. The policyholder has the flexibility to choose the term that best suits their long-term financial planning goals.
- Policy Term Options: 20 years, 25 years
- Risk Cover: The policy provides coverage against the risk of death throughout the policy term.
b. Money Back Benefit
The Money Back feature is one of the most attractive aspects of this policy. Under the plan, the policyholder receives periodic payouts of a percentage of the sum assured during the policy term. These payments are made at specified intervals, typically at the end of the 5th, 10th, and 15th policy years, depending on the policy term selected.
- 30% of the Sum Assured is paid at the end of the 5th year.
- 30% of the Sum Assured is paid at the end of the 10th year.
- 40% of the Sum Assured is paid at the end of the 15th year (if the policy term is 20 years).
For example, if the policyholder chooses a sum assured of ₹10,00,000, the payments would be made as follows:
- After 5 years: ₹3,00,000 (30% of the sum assured)
- After 10 years: ₹3,00,000 (30% of the sum assured)
- After 15 years: ₹4,00,000 (40% of the sum assured)
These payments act as a survival benefit and can help the policyholder meet various financial needs at different stages of life.
c. Death Benefit
In the unfortunate event of the policyholder’s death during the policy term, the nominee receives the Death Benefit, which is the sum assured on death along with any accrued bonuses. The sum assured on death is typically higher than the sum assured in case of survival.
- Sum Assured on Death is the higher of:
- The sum assured on the policy (basic sum assured), or
- 10 times the annual premium (depending on the sum assured).
The death benefit is payable even if the policyholder has already received money back benefits during the policy term. However, if the policyholder dies after receiving the full sum assured, the remaining balance of the death benefit is paid.
d. Bonus Facility
Since the LIC New Money Back Plan 720 is a participating policy, it is eligible for bonuses. These bonuses are not guaranteed and depend on LIC’s performance and its surplus funds. The policy may receive:
- Reversionary Bonuses, which are declared annually.
- Final Additional Bonuses, which may be added when the policy matures or in the case of death claims.
The bonuses, if declared, will be added to the policy’s benefit at the time of maturity or death, enhancing the overall sum paid out.
e. Loan Facility
The LIC New Money Back Plan 720 allows the policyholder to avail of a loan against the policy. The loan amount is typically up to 90% of the surrender value of the policy. The loan can be availed during the policy term in case of any emergency or to meet liquidity requirements.
f. Maturity Benefit
On survival at the end of the policy term, the policyholder will receive the sum assured on maturity, which is the full sum assured of the policy, along with any bonuses that may have been declared. The maturity benefit is paid in one lump sum.
- If the policyholder survives the full policy term, they will receive the full sum assured (as a lump sum) plus bonuses if applicable.
g. Tax Benefits
The policyholder can avail of tax benefits under Section 80C of the Income Tax Act, for the premiums paid under the policy. Additionally, the death benefits and maturity benefits are exempt from tax under Section 10(10D), subject to the conditions set by the tax laws.
3. Eligibility Criteria for LIC New Money Back Plan 720
The following are the eligibility criteria to take up the LIC New Money Back Plan 720:
- Minimum Age: 13 years (completed)
- Maximum Age: 50 years (for a 25-year policy term); 55 years (for a 20-year policy term)
- Minimum Sum Assured: ₹1,00,000
- Maximum Sum Assured: No limit, subject to underwriting norms.
- Premium Payment Mode: The premium can be paid either annually, half-yearly, quarterly, or as a lump sum in the case of single premium policies.
4. Benefits of LIC New Money Back Plan 720
The LIC New Money Back Plan 720 offers a variety of benefits to policyholders:
a. Financial Protection and Liquidity
The plan offers financial protection through the sum assured, ensuring that the family is financially protected in case of the policyholder’s unfortunate death. The periodic payouts also ensure liquidity at critical times, helping the policyholder meet financial needs as they arise.
b. Life Cover with a Savings Component
The plan offers both life cover and savings, making it a balanced financial product. The money back feature acts as an additional saving tool, while the death benefit provides coverage to the family.
c. Flexibility in Premium Payment
The policy offers different premium payment options, including yearly, half-yearly, quarterly, or monthly modes. This makes it easier for individuals with varying income patterns to invest in the policy.
d. Tax Savings
Policyholders can avail of tax deductions under Section 80C for premiums paid, and the death or maturity benefits are tax-exempt under Section 10(10D). This provides an added advantage for those looking to save taxes while investing in an insurance plan.
e. Bonuses
As a participating plan, it gives the policyholder the chance to receive bonuses, which increase the overall payout at the end of the policy term. These bonuses are not guaranteed, but when declared, they add value to the plan.
5. How Does LIC New Money Back Plan 720 Work?
Let’s take an example to understand how the LIC New Money Back Plan 720 works.
Example:
Let’s assume that Mr. Rahul, aged 35 years, purchases the LIC New Money Back Plan 720 with a policy term of 20 years and a sum assured of ₹10,00,000.
- Policy Term: 20 years
- Sum Assured: ₹10,00,000
- Annual Premium: ₹46,780 (approximately)
- Premium Mode: Annually
Year-by-Year Breakdown
- At the End of Year 5: Rahul will receive 30% of the sum assured, which is ₹3,00,000. This is a survival benefit that he can use for any immediate needs.
- At the End of Year 10: Rahul will receive another 30% of the sum assured, which is ₹3,00,000.
- At the End of Year 15: Rahul will receive the final 40% of the sum assured, which is ₹4,00,000.
- At the End of Year 20: The policy matures, and Rahul will receive the full sum assured of ₹10,00,000 as maturity benefit, plus any bonuses that may have been declared during the policy term. Let’s assume the bonus declared amounts to ₹2,00,000, bringing the total maturity benefit to ₹12,00,000.
Death Scenario:
If Rahul were to pass away in the 10th year of the policy, his family would receive the death benefit. Since the sum assured on death is generally higher than the sum assured on survival, his family would likely receive the higher of the sum assured or 10 times the annual premium. In this case, the death benefit could be ₹10,00,000 (the sum assured), plus any bonuses declared.
6. Conclusion
The LIC New Money Back Plan 720 is an excellent option for individuals looking for a life insurance plan that provides both financial protection and liquidity. With its money-back feature, policyholders receive periodic payouts during the policy term, making it easier to manage financial needs at different life stages. Additionally, the plan provides tax benefits, loan facilities, and the possibility of bonuses.
The policy is well-suited for those who want life coverage as well as a long-term savings component. By understanding the features, benefits, and how the plan works, policyholders can make an informed decision and choose a plan that aligns with their financial goals and needs.