LIC Digi Credit Life (Plan 878)

LIC recently launched a new term plan called LIC Digi Credit Life (Plan 878). This term plan is meant for those who wish to cover their existing loan risk.

Refer to the recently launched LIC Term Plan reviews at –

LIC Digi Credit Life (Plan 878) 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 where policies are not entitled to any share in surplus (profits) during the term of the policy. 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.

How does LIC Digi Credit Life (Plan 878) protect your loan?

This term plan is meant for those who have liability and protect the principal in case of their sudden demise. This concept is called as DECREASING SUM ASSURED TERM PLAN. This may also be called as RISK COVER SCHEDULE of the term plan.

Let us take an example. Assume that you have Rs.1 Cr of home loan with an 8% interest rate and a loan tenure is 25 years. Once you buy Rs.1 Cr LIC Digi Credit Life Term Life Insurance, then the life risk coverage during the whole 25 years will not remain the same as how in the typical term life insurance. However, it will adjust to the outstanding principal of your home loan for each year. Whatever the outstanding balance is available at the beginning of the policy period, that is your sum assured available under this policy. The schedule looks like below (just for example purposes). Notice that at the beginning of the 25th year, the outstanding principal of the home loan is Rs.8,87,265, if the policyholder dies during this 25th year period, then his nominee will receive Rs.8,87,265 but not the Rs.1 Cr (initial sum assured you opted).

This way, you can protect your any liability by buying such reducing sum assured term plans. Hence, this will make you worry-free in case of your sad sudden demise of a policyholder.

You can do your own calculation of home loans or for that matter any loans by referring to my articles “Home Loan EMI Calculator 2024 – Download Free Excel Sheet” and “Prepay Home Loan Calculator – Download Free Excel Sheet“.

You can choose the interest rate of your loan at the start of the policy. The available interest rates for Risk Cover Schedule are 6%, 7%, 8%, 9%,10%,11%, and 12%, irrespective of the Interest rate charged by the Loan provider on the loan availed by the Policyholder.

LIC Digi Credit Life (Plan 878) – Eligibility

Let us now check the eligibility of LIC Digi Credit Life (Plan 878)

• 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 and Premium Payment Term – For 5-30 Yrs Term – Single Premium, 10-30 Yrs Term – 5 Yrs, 15-30 Yrs – 10 Yrs and for 25-30 Yrs Term – 15 Yrs
• This policy will not offer any paid-up, surrender, or loan facilities as it is a term life insurance.

LIC Digi Credit Life (Plan 878) – Benefits

The benefits of LIC Digi Credit Life (Plan 878) are as follows.

Death Benefit –

For the Limited premium payment policy, “Sum Assured on Death” is defined as the higher of:

• 105% of “Total Premiums Paid” up to the date of death; or
• The absolute amount assured to be paid on death. Where, “Total Premiums Paid” means the total of all premiums paid under the base product, excluding any extra premium and taxes, if collected explicitly.

For a Single premium policy, “Sum Assured on Death” is defined as :

• The absolute amount assured to be paid on death. Where a Single Premium shall be the premium amount payable excluding taxes and underwriting extra premiums.

The absolute amount assured to be paid on death shall be as specified in the Risk Cover Schedule.
The Risk Cover Schedule shall show the Sum Assured on Death for each Policy Year and shall be based on the chosen interest rate p.a. effective on an equated yearly repayment basis, irrespective of the actual loan repayment. At the
inception, the Sum Assured on Death shall be equal to the Basic Sum Assured, and subsequently, at each Policy Year, the Sum Assured on Death shall be as mentioned in the Risk Cover Schedule. Death Benefit as specified in the Risk Cover Schedule may be higher or lower than the actual outstanding loan.

Maturity Benefit –

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

What if you prepay the loan earlier than the term of the loan?

If a Life Assured repays the outstanding loan before the end of the policy term, he/she shall have the following two options –

a) To surrender his/her insurance cover – On such cancellation, an amount equal to Unexpired Risk Premium Value, if any, as specified in Para 11 below shall be payable.

b) To continue the policy till the end of the Policy Term – In case of death of the Life Assured during the policy term, the death benefit shall be payable to the nominee as per the Risk Cover Schedule.

LIC Digi Credit Life (Plan 878) – Premium Illustration

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

Don’t compare the premium of LIC Digi Credit Life (Plan 878) with the LIC Digi Term Plan. In the case of LIC Digi Credit Life, the sum assured will be reduced on a yearly basis. However, in the case of the LIC Digi Term Plan, it will remain the same. Hence, as both products are meant for different purposes, comparing is useless.

LIC Digi Credit Life (Plan 878) – Should you buy?

Yes, you can definitely consider this if the purpose is to cover your home loan only. However, just by comparing the premiums with LIC Digi Term don’t buy this plan (thinking premium is cheaper here). The premium of this plan is cheaper as the sum assured will reduce on yearly basis.

But one drawback I can see in this plan is you have to mention the home loan interest at the time of buying only. Let us assume that your current interest rate is 8% and in the future if the interest rate on your home loan increases to 9%, then the principal outstanding because of this higher interest rate (in case you have not opted for increasing the EMI) on yearly basis will also be increased than what the risk cover schedule available. In the middle, you can’t change the interest rate in this policy and accordingly can’t increase or decrease the risk cover schedule. Hence, to cover this risk, you have no option but to opt for a higher interest rate than the current actual home loan interest rate. In such a situation, you end up paying a higher premium.