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Tuesday, May 24, 2016

LIC New Endowment Plus Review

 

LIC is going to launch the new ULIP Plan. This is called as New Endowment Plus (Table No.835). After the IRDA regulations, LIC closed all its existing ULIP Plan (including the Endowment Plus Plan). Now, after a long wait, it is launching ULIP.

LIC's Endowment Plus-835

As I said above, this is the ULIP (Unit Linked Insurance Plan). This is insurance cum investment plan, where the money will be invested in an equity market.

Features-

# This is a ULIP (Unit Linked Insurance Plan).

# You can choose your premium amount.

# Your insurance coverage will be based on the premium amount you have chosen.

# LIC charges premium allocation amount. This is 7.5% in the first year, 5% from 2nd to 5th year, and 3% after the 6th year.

# LIC charges Fund Management Charges too. This will be 0.70% per year on unit fund.

# If you discontinue then LIC penalizes you by charging 0.50% per year on unit fund.

# The rest of the amount will be invested in the market based on the option chosen by an investor (confused to say between investor or policyholder).

 

Units will be allocated based on NAV (Net Asset Value) of the respective fund applicable on the date of allotment.

# NAV will be calculated on a daily basis, based on the performance of the fund and fund management charges.

Eligibility of LIC's New Endowment Plus (Table No.835)

  • Minimum age at entry is 90 days.
  • Maximum age at entry is 50 years.
  • Policy Term is 10 to 20 Years.
  • Minimum Annual Premium is Rs.20, 000.
  • Maximum Annul Premium limit-NO LIMIT.
  • Basic Sum Assured mean higher of 10 times of annual premium and 105% of total premiums paid.

What is the maturity benefit?

An amount equal to Policyholder's Fund Value will be payable.

What is the commencement of Risk?

  • If entry age is less than 8 Yrs-Date of Purchase+2 Years.
  • If entry age is more than 8 Yrs-Immediately.

What is the death benefit under this plan?

 
  • Death before commencement of Risk:-

An Amount equal to policyholder fund value shall be payable immediately on the date of receipt of intimation of death with a death certificate.

  • Death after commencement of Risk:-

Once the commencement of risk cover, higher of Basic Sum Assured OR Policy Holder's Fund Value will be payable.

What riders available in this plan?

This plan offers you accidental rider by paying an extra premium. Few eligibility criteria for this rider is as below.

  • Minimum Age 18 Years.
  • Maximum age 55 Years.
  • Minimum Accidental Rider Benefit will be Rs.10, 000.
  • Maximum Accidental Rider Benefit will be 10 times of your annual premiums. (The maximum limit including all LIC policies must not be more than Rs.100 lakh.

As of now, I have this much information only. I will update the rest of features as and when I get.

Switching of Fund-

Only four switches are free. Later on you have to Rs.100 per switch.

Top-Up Option

This plan does not offer any top-up facility.

Loan Facility-

This plan does not offer loan facility.

What are surrender conditions?

  • You can surrender after completion of 5 years.
  • Fund value as on surrender date will be payable.

Whether you go for this ULIP Plan?

Strictly NO… Why? The reasons are as below.

1) Expenses-The fund average expenses will be around 3% (along with that there are fund management charges of 0.7%), which I feel costlier when we have well-established mutual funds offering your equity investments at around half of this expense.

2) No Track Record-We do not know how the fund managers perform as we don't have historical data. Hence, the risk of underperforming is more.

3) Liquidity-Liquidity is an issue with ULIPs as there will be some charges or penalty (I will update you about surrender charges once I get a clear picture of this product).

4) Insurance coverage-Ideally, who buy a such Insurance+Invesment product ignore the actual insurance requirement. They look for premium affordability and based on that they select the sum assured. Hence, they forget the real requirement of life insurance in one's life. The ideal requirement of life insurance must be around 15-20 times yearly income.

5) Death Benefit-Let us say you opted Term Insurance and started to invest in equity mutual fund or debt product based on the risk appetite. What your nominee will receive in case of death? They receive the sum assured amount of term insurance and the value of the investment you did (either in equity or in debt).

But in this plan, HIGHER of Basic Sum Assured OR the Fund Value. Therefore, I feel this as the biggest disadvantage.

These are the features, benefits, and details available as of now

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