LIC Digi Term (Plan 876) – Eligibility, Benefits and Review

LIC recently launched a new term plan called LIC Digi Term (Plan 876). Which is better LIC Digi Term or existing LIC Tech Term plan? Let us do the analysis.

LIC’s Digi Term is a Non-Par, Non-Linked, Life, Individual, Pure Risk Plan, which provides financial protection to the insured’s family in case of his/her unfortunate death during the policy term. This is a non-par product under which benefits payable on death are guaranteed and fixed irrespective of actual experience. Hence the policy is not entitled to any discretionary benefits like bonus etc. or share in Surplus. This plan offers special rates for women.
This plan shall be available Online only and can be purchased directly through the website www.licindia.in. Do remember that LIC launched an OFFLINE version of this plan with the name “LIC Yuva Term (Plan 875)”. This OFFLINE plan can be purchased only through agents and it’s more costly than LIC Digi Term Plan. You can refer to the review of LIC Yuva Term (Plan 875) and its comparison of premiums in that post “LIC Yuva Term (Plan 875) – Eligibility, Benefits and Review“.

LIC also launched a new online term plan those who wish to cover the outstanding loan risk. Refer the complete review of that plan at “LIC Digi Credit Life (Plan 878) – Online Term Plan to cover loans“.

LIC Digi Term (Plan 876) – Eligibility

Let us now check the eligibility of LIC Digi Term (Plan 876)

• Minimum Age at entry – 18 years
• Maximum Age at entry – 45 years
• Minimum Age at Maturity – 33 years
• Maximum age at Maturity – 75 years
• Minimum Basic Sum Assured – Rs.50,00,000
• Maximum Basic Sum Assured – Rs.5,00,00,000
• Policy Term – 15 to 40 years under Regular/Single/Limited Premium of 10 years (20 to 40 years under Limited Premium of 15 years).
• Premium Payment Term – Regular, Limited Premium of 10 years, Limited Premium of 15 years and Single Premium.
• Option to receive Death Benefits in instalments over a period of 5 or 10 or 15 years instead of a lump sum amount under an in-force policy. This option can be exercised by Life Assured during his/her lifetime; for full or part of Death benefits payable under the policy. The amount opted by the Life Assured (i.e. Net Claim Amount) can be either in absolute value or as a percentage of the total claim proceeds payable.
• This policy will not offer any paid-up, surrender, or loan facilities as it is a term life insurance.

LIC Digi Term (Plan 876) – Benefits

The benefits of LIC Digi Term (Plan 876) are as follows.

Death Benefit –

The death benefit payable on the death of the Life Assured during the policy term after the date of commencement of risk but before the date of maturity provided the policy is in force and the claim is admissible shall be “Sum Assured on Death”.
Under Regular Premium and Limited premium payment, “Sum Assured on Death” is defined as the highest of:

• 7 times of Annualised Premium; or
• 105% of “Total Premiums Paid” up to the date of death; or
• Absolute amount assured to be paid on death.
  Under Single premium payment, “Sum Assured on Death” is defined as the higher of:
• 125% of Single Premium; or
• Absolute amount assured to be paid on death.

The death benefit payable under this plan depends on which option you have chosen at the time of buying the policy.

Option 1 (Level Sum Assured) means the sum assured will remain the same throughout the policy period – The amount to be paid on death will be an amount equal to Basic Sum Assured, which shall remain the same throughout the policy term.

Option 2 ( Increasing Sum Assured) – Under this feature, the sum assured to be paid on death will remain equal to the Basic Sum Assured up to the completion of the fifth policy year. After that, it increases by 10% of the Basic Sum Assured each year from the sixth policy year till the fifteenth policy year till it becomes twice the Basic Sum Assured. This increase will continue under an in-force policy till the end of the policy term; or till the Date of Death; or till the fifteenth policy year, whichever is earlier. From the sixteenth policy year and onwards, the sum assured to be paid on death remains constant i.e. twice the Basic Sum Assured till the policy term ends.

For example – Let us say you purchased Rs.1 Cr policy, then the sum assured payable at death during the first 5 years is Rs.1 Cr. From 6th year onwards, it will increase at the rate of 10% of Rs.1 Cr. During this year, the death benefit will be payable as per the incremental ratio (6th year – Rs.1,10,00,000, 7th year – Rs.1,20,00,000, and so on up to 15th year). After the 15th year, the sum assured payable at death will turn to double the basic sum assured you purchased (Rs.1 Cr). After this, there will not be any increment in sum assured. Instead, it will remain the same throughout the policy period.

Maturity Benefit –

On survival of the life assured to the end of the policy term, no maturity benefit is payable.

LIC Digi Term (Plan 876) – Premium Illustration

Let us now look into the premium illustration of this plan.

Now I tried to compare the premium of LIC Digi Term with existing LIC Term Life Insurance of LIC Tech Term for a sum assured of Rs.50,00,000, term 20 years, age of the policyholder as 30 years, yearly premium and level sum assured option, then the premium quoting for online purchase is Rs.5,250. You noticed that the premium is cheaper for LIC Digi Term (Rs.4,700) compared to LIC Tech Term (Rs.5,250) means a difference of 550.

LIC Digi Term (Plan 876) – Should you buy?

If you cautiously compare LIC Digi Term with LIC Tech Term, you notice that LIC Digi Term looks like meant for young guys. Because the maximum entry age in the case of LIC Digi Term is 45 years. However, for LIC Tech Term, is 65 years. Also, in terms of LIC Digi Term, the maximum cap of buying the sum assured is Rs.50 Cr but the same is not there in the case of LIC Tech Term.

Premium is cheaper than the LIC Tech Term (I have shared the comparison above). Hence, considering all these pointers, if you are below 45 years old, then I think the LIC Digi Term looks like a better option than the existing LIC Tech Term. Mainly because the rest of the major features are the same in both the plans.

However, opting for an increase in the sum assured is useless. Mainly because during the first 5 years, there is no increment in the sum assured (even though you are paying a higher premium than the level sum assured) and after the 15th year (once the sum assured doubles to what you purchased earlier), the sum assured will not increase but it will remain constant throughout the policy term. Hence, I don’t think it is a useful option to choose and pay a hefty premium.