Life Insurance Corporation (LIC), a well known name in the insurance industry has again come up with new insurance plans. LIC introduced two insurance policies with the name Flexi Plus and New Jeevan Nidhi in the beginning of the year 2013. Talking about LIC Flexi Plus policy, it is a unit linked policy which offers the benefit of both insurance and investment. Being a unit link plan, this policy offers you a good mix of protection and long term savings under a single integrated plan. This type of policies offers death benefits + maturity benefits irrespective of survival of the policyholder. Which means in case of death of policy holder nominee will get both death benefit i.e the sum assured + maturity benefit i.e the investment part of the policy. So lets have a look at the other features of Flexi Plus insurance plan and see is it worth investing in this policy or not.
Policy Term :- The minimum time that you can choose to invest in this policy is 10 years which can go upto 20 years. So as an investor you have a flexibility to choose the term of the policy i.e for how many years you want to be invested in this policy.
Policy Premium Modes:- LIC offered all premium modes to make people pay premium amount as per their convenience. The different premium payment modes available are Yearly i.e ones in an year, Half yearly i.e twice an year, Quarterly i.e four times an year or monthly i.e every month.
Policy Premium Amount :- LIC has set minimum and maximum premium amounts for different premium modes. One can decide the premium amount as per his need and pay the same as per the premium payment mode selected.
|Premium Payment Mode||Minimum Premium||Maximum Premium|
|Yearly||Rs 15,000||Rs 100,000|
|Half-Yearly||Rs 10,000||Rs 50,000|
|Quarterly||Rs 5,000||Rs 25,000|
|Monthly||Rs 2,000||Rs 8,000|
Investment :- Flexi plus plan offers you to choose out of two investment funds i.e Debt fund and Mixed Fund. LIC will then invest the amount allocated for investment in the fund type chosen by the investor. Here is the details of the fund types:;-
|Fund Type||Govt. Securities/ Govt. Guaranteed securities/ corporate Debts||Short term investment like money market instruments||Listed Equity Shares||Risk/ Return|
|Debt Fund||Not less than 60%||Not less than 40%||–||Low Risk|
|Mixed Fund||Not less than 45%||Not less than 40%||Not less than 15%||Steady Income with Medium Risk|
Partial Withdrawal :- Policyholder can make partial withdrawal of funds in case of some financial emergency or otherwise after 5th policy anniversary.
Grace Period :- Like other policies LIC flexi plus gives a grace period of 1 month for the payment of policy premium to the policyholder in case of yearly, half-yearly and quarterly premium payment modes and 15 days for monthly premium payment.
Eligibility :- To buy this policy your age should be between 18 to 50 years. Any one less than 18 years or above 50 years will not eligible to get into this policy. The maximum maturity age is 60 years which means whatever your age at the time of purchasing this policy your policy will mature once you complete 60. So you should choose the term of the policy according to your current age.
ALSO READ : Difference Between ULIP And Mutual Funds
Sum Assured :- In flexi plus insurance plan the sum assured will be higher of :-
10 times the annual premium
105% of the total premiums paid including any premiums which have fallen due but not paid)
So if your premium payment mode is yearly and you choose to invest Rs 15,000 for 10 years then your sum assured will be higher of :-
10 * 15,000 = 1,50,000
105/100 * 1,20,000 = 1,26,000 (Suppose you have paid yearly premium for 8 complete years)
So your sum assured will be Rs 1,50,000 which is higher out of above two cases.
Charges :- Like other unit linked plans insured will charge different charges like premium allocation charges, mortality charges etc. Here is the complete description of the charges levied on this policy.
- Premium Allocation Charges: In ULIP insured deducts a part of the annual premium paid by the policyholder for providing different services. So LIC will deduct this charge before making any investment.
|1st year premium||7.50%|
|2nd – 5th year premium||5%|
|After 5th year||3%|
- Mortality Charges: Insurance company offering life cover charges mortality charges. It varies with the age of the insured and sum assured. Mortality charges gets deducted on a monthly basis.
- Other Charges: The following charges shall be deducted during the term of the policy:
- Policy Administration charge – This charge shall be deducted on monthly basis which will be Rs 50 for the first year, Rs 44.20 for the 2nd year, Rs 42.44 for the 3rd year, Rs 43.71 for the 4th year, Rs 45.02 for the 5th year and Rs 34.78 thereafter.
- Fund Management Charge – This is a charge levied as a percentage of the value of assets at following rates:
- 0.50% p.a. of Unit Fund for “Debt” Fund
- 0.60% p.a. of Unit Fund for “Mixed” Fund
- Switching Charge – If you plan to switch to mixed fund from debt fund or vice versa than this switching charge will be levied on you. Although this plan allows 4 switches within a given policy year free of charge. Subsequent switches in that year shall be subject to a switching charge of Rs. 100 per switch.
- Discontinuance Charge – Due to some reason if you plan to discontinue your policy within first 4 years of the policy then you will have to pay discontinuation charges. Check discontinuation charges on your policy documents.
- Service Tax – This is a charge which is levied by the insurance company as per the service tax laws and rate of service tax as applicable.
- Miscellaneous Charge – This is a charge levied for an alteration within the contract, such as change in premium mode to higher frequency, and shall be a flat amount of Rs. 50.
Policy Surrender :- If policyholder want to surrender his policy within 5 years from the date of commencement of policy then you will have to pay surrender/ discontinuation charges and you will get the fund value of your units. But if you surrender after completion of 5 years then no surrender charges will be deducted and you will get the fund value of your units without any deduction.
ALSO READ : Whether Go With ULIP Or Endowment Plan
Guarantee of interest rate on Discontinued Policy Fund: Discontinued policies will get guaranteed interest rate as applicable to SBI saving bank account.
Cooling off period: If you don’t find the terms and conditions of the policy as per your need than you can return the policy and get your money back within 15 days. You can apply to return the policy within 15 days from the day you receive the policy and your company will deduct some charges like medical examination charges, administration charges etc. and refund your money.
Loan : This insurance plan does not allow you to get loan based on your policy.
Exclusions: In case ofIn suicide by policyholder within one year from the date of purchase of policy, insurance company will not be liable to pay any claim by virtue of the policy except to the extent of the Policyholder’s Fund Value on death.
Whether To Invest In LIC Flexi Plus Or Not ? Conclusion
This is a normal unit link plan where you get a good mix of insurance + protection. The most attractive feature of the policy is it gives death + investment benefits to the nominee in case of death. This is a plus point of this policy as there are very less amount of policies in the market which offers this both death & maturity benefit. In most of the other policies in case of death of the policyholder only sum assured is given to the nominee not the investment benefits.
Secondly if you are worried about the charges applicable on ULIP plans then it will be useful to know that the charges applied on ULIPs cost you almost half as compare to the charges applied on mutual funds. As in case ULIP the charges are applied on the premium you pay whereas on mutual funds expense ratio applies on the total AUM (Asset under management).
Other than this you have more investment options to consider. Here is a list of investment options which will offer you tax deduction under section 80C.