In order to provide a social security for all, Prime Minister Narendra Modi launched three such schemes last week, including an insurance cover for less than Rs 1 a day. The schemes — Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Atal Pension Yojana (APY) — were simultaneously launched at 115 locations in the country.
Pradhan Mantri Jeevan Jyoti Bima Yojana
Providing life insurance for a year, it will be renewable every year. It will be offered through Life Insurance Corporation of India (LIC) and other life insurers willing to offer the product on similar terms. The risk cover is R2 lakh upon death due to any reason. Subscribers who wish to continue beyond the first year will have to give consent for auto-debit before May 31 every year.
It will be available to those in the age group of 18-50 years with a bank account. People who join the scheme before completing 50 years can, however, continue to have the life cover up to the age of 55 years, subject to payment of premium. The premium is R330 per annum, auto-debited in one instalment from the bank account. The bank account will have to be linked to the Aadhaar number. This cover can be in addition to any other insurance scheme the subscriber has taken. Moreover, like all insurance products, the premium paid is eligible for tax deduction under Section 80C of the Income Tax act, 1961.
In case of multiple savings bank accounts held by an individual in one or different banks, the person would be eligible to join the scheme through one savings bank account only. Aadhaar would be the primary KYC for the bank account. For the cover period June 1, 2015 to May 31, 2016, subscribers will be required to enrol and give their auto-debit consent by May 31, 2015. Late enrolment for a prospective cover will be possible up to August 31, 2015.
An individual can exit the scheme at any point and rejoin by paying the annual premium and submitting a self-declaration of good health. While applying for the scheme, one can provide nomination. In the event of unfortunate death of the life insured, the sum assured would be paid to the nominee of the plan.
Pradhan Mantri Suraksha Bima Yojana
An accidental death cover for up to R2 lakh, it is available to people in the age group of 18-70 years having a bank account. The premium is R12 per annum and the amount will be auto-debited by the bank from the subscriber’s account.
Subscribers have to opt for the scheme every year. He can also choose the long-term option of continuing, in which case his account will be auto-debited every year by the bank. The scheme will be offered by all public sector general insurance companies and other insurers willing to join the scheme and tie-up with banks for this purpose.
The premium paid will be tax-free under Section 80C and the proceeds will get tax-exemption under Section 10(10D). In fact, Canara Bank has entered into an MoU with LIC for offering PMJJBY and United India Insurance for offering PMSBY to its eligible customers.
Atal Pension Yojana
This will replace the existing Swavalamban Yojana, or NPS Lites. The existing subscribers of Swavalamban Scheme would be automatically migrated to APY. The subscriber will get a monthly pension of R1,000-5,000 from the age of 60, depending on the contribution. The scheme is open to all account holders whose age is between 18 and 40 years and who are not members of any statutory social security scheme. One needs to contribute till one attains 60 years of age. Therefore, the minimum period of contribution by the subscriber would be 20 years.
In APY, the monthly contribution would automatically be deducted from the subscriber’s bank account. The subscriber should ensure that the bank account has enough money for the auto-debit. If there is a delay in contribution, the bank would levy penalty.
The government swill guarantee a fixed pension and co-contribute 50% of the subscriber’s contribution, or R1,000 per annum, whichever is lower, to each eligible subscriber account, for a period of five years, that is, from 2015-16 to 2019-20. This will be applicable to those joining the scheme before December 31 this year. If someone subscribes to APY at 35 years, he will contribute till the age of 60 years, that is, for 25 years. To get a monthly pension of R1,000, he will have to contribute R181 a month.
Analysts say both PMJJBY and PMSBY will help deepen insurance penetration in the country as they offer covers at a very low premium. They advise that even those with a life cover may consider the two new schemes as an additional cover.