Aam Aadmi Bima Yojana

The Aam Aadmi Bima Yojana (AABY) is a social security and insurance scheme launched by the Government of India to provide life and disability insurance coverage to rural landless households and individuals working in the unorganised sector. Introduced to safeguard vulnerable populations against financial distress due to death or disability, the scheme represents one of the country’s key welfare measures aimed at extending the benefits of insurance to economically weaker sections of society.

Background and Evolution

The Aam Aadmi Bima Yojana was officially launched on 2 October 2007, coinciding with the birth anniversary of Mahatma Gandhi. It was introduced by the Ministry of Finance and later administered through the Department of Financial Services under the Ministry of Labour and Employment. The scheme was initially implemented in collaboration with the Life Insurance Corporation of India (LIC), which acted as the nodal agency for policy administration and claims settlement.
Before AABY, various smaller insurance schemes existed for low-income groups, such as the Social Security Group Insurance Scheme (SSGIS) and the Rural Group Life Insurance Scheme (RGLIS). To streamline and unify these fragmented efforts, the Government merged them into a single comprehensive insurance programme — the Aam Aadmi Bima Yojana — ensuring uniform benefits and simplified access for all eligible individuals.

Objectives of the Scheme

The main objectives of the Aam Aadmi Bima Yojana are to:

• Provide life and disability insurance coverage to rural landless households and workers in unorganised sectors.
• Offer financial assistance to families in the event of death or disability of the earning member.
• Promote social inclusion by extending insurance benefits to poor and marginalised communities.
• Encourage risk protection and financial literacy among economically weaker sections.

The programme is designed to act as a safety net for families dependent on a single earning member, particularly those without access to formal insurance or savings mechanisms.

Eligibility and Coverage

The AABY targets rural landless households whose members are between 18 and 59 years of age. Initially, one earning member per eligible household was entitled to the benefits. The scheme covered individuals belonging to 48 approved vocational groups such as weavers, fishermen, carpenters, beedi workers, cobblers, handloom weavers, and others engaged in unorganised occupations.
Eligibility Criteria:

• The applicant must be aged between 18 and 59 years.
• The applicant must belong to a rural landless household or fall under an identified vocational group.
• The head of the family or one earning member is entitled to coverage.
• The family must be identified by the State or Union Territory Government or through nodal agencies such as Panchayats or Self-Help Groups (SHGs).

Insurance Benefits

The Aam Aadmi Bima Yojana provides a range of life and disability benefits to insured persons and their families. The benefits are structured as follows:

• Natural Death: ₹30,000 payable to the nominee or family.
• Accidental Death: ₹75,000 payable in case of death due to accident.
• Permanent Total Disability (due to accident): ₹75,000 payable.
• Partial Permanent Disability (loss of one limb or one eye): ₹37,500 payable.

The scheme also includes a scholarship benefit for children of the insured person to support their education, ensuring the welfare of the next generation.

Scholarship Benefits

One of the key features of the AABY is the provision of educational scholarships to the children of insured members.

• Two children of the insured family studying in classes 9 to 12 are eligible.
• A scholarship of ₹100 per month per child is provided.
• The scholarship is payable on a half-yearly basis (₹600 at a time) through direct transfer into the student’s bank account or through the nodal agency.

This educational component reflects the government’s emphasis on human capital development alongside social protection.

Premium Structure and Funding

The total premium under the scheme was ₹200 per annum per member. The premium was shared equally between the Central Government and the State Government in the ratio of 50:50. However, for members belonging to certain occupational groups associated with welfare boards or national social security schemes, the entire premium was borne by the Government of India.
The funding pattern ensured that individuals did not bear any premium cost themselves, thereby encouraging maximum coverage among economically weaker families. The Life Insurance Corporation of India managed the fund and disbursed claims efficiently through designated nodal agencies.

Implementation Mechanism

Implementation of the AABY involved coordination among multiple stakeholders, including:

• State Governments and Union Territory Administrations, responsible for identifying eligible beneficiaries and enrolling them.
• Nodal Agencies, such as Panchayati Raj Institutions, Self-Help Groups, Cooperative Societies, or welfare boards, tasked with facilitating enrolment and premium payment.
• LIC of India, acting as the implementing and claims-settling agency, maintaining records, issuing policy certificates, and disbursing benefits.

Each beneficiary was issued an identity card-cum-passbook, containing details of the insured member, nominee, and coverage particulars.

Merging with Other Schemes

In 2013, the Government launched the Rashtriya Swasthya Bima Yojana (RSBY) for health insurance, complementing AABY’s life coverage. Later, as part of financial inclusion reforms, several social security schemes were rationalised. In May 2015, the Aam Aadmi Bima Yojana was merged with the Janashree Bima Yojana (JBY) to create a unified insurance programme for the poor.
Subsequently, in 2017, the Government introduced the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and the Pradhan Mantri Suraksha Bima Yojana (PMSBY), providing similar but broader insurance coverage. The operational aspects of AABY were gradually subsumed under these newer schemes to ensure universal reach and easier administration.

Achievements and Impact

The Aam Aadmi Bima Yojana significantly expanded social insurance coverage among unorganised workers and low-income households. Key achievements include:

• Over 4 crore beneficiaries covered within the first decade of implementation.
• Effective financial protection for rural families against accidental or natural death of the breadwinner.
• Integration of insurance literacy in rural and semi-urban areas.
• Positive impact on education retention rates through scholarship benefits.
• Enhanced collaboration between states and LIC in implementing welfare-oriented insurance programmes.

States such as Tamil Nadu, Andhra Pradesh, Maharashtra, and Rajasthan showed exemplary performance in enrolment and claim settlement under the scheme.

Challenges and Limitations

Despite its success, the AABY faced several challenges in implementation:

• Identification of beneficiaries: Difficulty in accurately identifying rural landless households led to exclusion and inclusion errors.
• Awareness deficit: Many potential beneficiaries were unaware of their eligibility or the claim process.
• Delays in claims: Bureaucratic procedures and documentation occasionally delayed benefit disbursement.
• Limited coverage amount: The financial assistance, though helpful, was often insufficient to meet long-term family needs.
• Administrative overlap: The presence of multiple insurance schemes caused duplication and confusion at local levels.