LIC Dhan Rekha 863 – Cash Again / Assured Addition Plan – Must you make investments?

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LIC is launching a new money-back and Guaranteed Addition plan of LIC Dhan Rekha 863. It is a Non-Linked, Non – Participating, Individual, Savings, Money Back Life Insurance Plan.

Let us look at the plan features, eligibility, and whether one should buy this product or not.

Features and eligibility of LIC Dhan Rekha 863

LIC Dhan Rekha 863 - Eligibility and Features

All modes of premium payment are available like single premium, yearly, half-yearly, quarterly or monthly. The attraction of this policy is the GUARANTEED ADDITION and the rates of the same are as below.

Term 6-20 Yrs – Rs.50 per Rs.1,000 Sum Assured

Term 21-30 Yrs – Rs.55 per Rs.1,000 Sum Assured

Term 31-40 Yrs – Rs.60 per Rs.1,000 Sum Assured.

It means suppose if you opted for 30 years policy, then there is no GA from the 1st year to 5th year. From 6th year onwards to 20 years period, the GA is added at Rs.50 and then from 21 to 30 years, the GA is considered as Rs.55. Like this, the GA will increase based on the above table and terms of the policy.

LIC Dhan Rekha 863 Benefits

Let us now look into the LIC Dhan Rekha 863 benefits. Usually, in the case of such money-back plans, there are two types of benefits. One is survival benefit (if the policyholder survives till the maturity date) or death benefit.

# Surival Benefits of LIC Dhan Rekha

Survival Benefits under this policy is payable as below based on the term of the policy.

20 Years Policy – 10% of Sum Assured at the end of 10th and 15th Year. On 20th year, the Sum Assured + Guaranteed Addition @ Rs.50 per Rs.1,000 Sum Assured from the 6th year to the 20th year is payable. For the 1st to 5th year, there is no GA.

30 Years Policy – 15% of Sum Assured at the end of 15th, 20th, and 25th Year. On the 30th year, the Sum Assured + Guaranteed Addition @ Rs.50 per Rs.1,000 Sum Assured from 6th to 20 year is payable. From 21st to 30th year, the GA @ Rs.55 per Rs.1,000 Sum Assured is payable.

40 Years Policy – 20% of Sum Assured at the end of 20th, 25th, 30th, and 35th Year. On the 40th year, the Sum Assured + Guaranteed Addition @ Rs.50 per Rs.1,000 Sum Assured from 6th to 20 years is payable. From 21st to 30th year, the GA @ Rs.55 per Rs.1,000 Sum Assured is payable. For the final 31st to 40 years period, the GA is calculated @ Rs.60 per Rs.1,000 Sum Assured is payable.

# Death Benefits of LIC Dhan Rekha

If a policyholder’s death happens during the policy term, then 125% of Sum Assured + Accrued Guaranteed Addition.

LIC Dhan Rekha 863 – Should you invest?

It is a typical traditional plan where the returns are less than or around 5%. The only thing that you can see here is again LIC is bringing its old concept of selling the products as GUARANTEED. As I told you many times if you really wish to sell something in India BLINDLY, then three things matter – Tax Saving, Guaranteed, and Tax-Free returns. This is one such product. However, generating around 5% returns for your long-term investments like 20, 30, or 40 years is not worthy. Let me give you an example of this plan and show you how it works.

LIC Dhan Rekha 863 Returns Expectations

In the above example, you start paying the premium from the 1st year to the 15th year. On completion of 15th year (beginning of 16th), 20th and 25th year, LIC will give you 15% of Sum Assured. After the completion of 30th year (beginning of the 31st year), LIC will pay you the full sum assured i.e Rs.10 lakh and GA as Rs.50 from 6th to 20 year (Rs.7,50,000=Rs.50,000*15) and Rs.55 from 21st to 30th year (Rs.5,50,000=Rs.55,000*10). So in total, you will receive Rs.23,00,000 after the completion of 30 years.

You noticed that the returns are so minimal that hard to say how LIC designed it. If you are happy to get 4.4% returns by investing for 30 years, then go ahead and enjoy this policy.

The catch here is that from the 1st year to 5th year, LIC is not giving you any GA. It is a kind of ZERO return on investment.

Considering all these horrific features like long-term abysmal returns, I strongly suggest you stay away from such products. I know that agents may try to pitch you the product with the claim of GUARANTEED, TAX SAVING, or TAX-FREE MATURED amount. But at what cost? If the inflation is at around 6% and such products offer you 5% returns, then obviously by each passing year, you are under the negative return of -1%.

THINK TWICE BEFORE BUYING SUCH PRODUCTS. By selling this product to you, LIC agents DHAN REKHA will increase but not your’s.

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