LIC has its unique way of wishing “happy new year” by launching new products. This time LIC has come up with 2 new products – A Unit Linked Product (ulip) “LIC Flexi Plus” and a traditional pension policy “New Jeevan Nidhi”. Timing of Launch of the policies is also due to sharp business sense among LIC management as they understand Indian Psyche very well. They know that come what may we‘ll start looking for tax saving options in the months of January February only and If the new product is launched by LIC then people will definitely give it a consideration and deserving attention. Through in this article I have reviewed LIC Flexi Plus and try to figure out how this is different from other options available for investors.
LIC Flexi Plus – Summary
It is a normal Unit linked plan launched as per the new ULIP guidelines by IRDA. It has very less charges as compared to ULIP’s previous versions. The minimum premium paying period is 5 years. The Premium payment after deducting the allocation charges gets invested in a selected investment option and you will get the fund value on maturity or surrender (applicable after 5 years). Fund value totally depends on the performance of the investment option and will be calculated as No. of units available on surrender/maturity after deducting all expenses, multiplied by NAV. If you discontinue the premium payment before 5 years than the fund value in the year of discontinuance will be transferred to a discontinued fund after deducting the discontinuation charges. This fund will earn you saving bank account interest rate of State bank of India. As LIC Flexi Plus is a Unit Linked Insurance plan, so it has some insurance features too. It offers sum assured as 10 times annual premium or 105% of total premiums paid whichever is higher. Please note that it is mandatory to have 10 times of Sum assured on your premium payment to get section 80C tax benefit.
LIC Flexi Plus – Key benefits
LIC Flexi Plus – Discontinuation Charges
|Where the policy is discontinued during the policy year||Discontinuance charges for the policies having annualized premium up to Rs. 25,000/-||Discontinuance charges for the policies having annualized premium above Rs. 25,000/-|
|1||Lower of 15% * (AP or FV) subject to a maximum of Rs. 2500/-||Lower of 6% * (AP or FV) subject to maximum of Rs. 6000/-|
|2||Lower of 7.5% * (AP or FV) subject to a maximum of Rs. 1750/-||Lower of 4% * (AP or FV) subject to maximum of Rs. 4000/-|
|3||Lower of 5% * (AP or FV) subject to a maximum of Rs. 1250/-||Lower of 3% * (AP or FV) subject to maximum of Rs. 3000/-|
|4||Lower of 3% * (AP or FV) subject to a maximum of Rs. 750/-||Lower of 2% * (AP or FV) subject to maximum of Rs. 2000/-|
|5 and onwards||NIL||NIL|
Also please note that discontinued fund will be charged with 0.5% p.a of Fund management Charges
LIC Flexi Plus – Investment Funds
|Fund Type||Investment in Government / Government Guaranteed Securities / Corporate Debt||Short-term investments such as money market instruments||Investment in Listed Equity Shares||Details and objective of the fund for risk /return|
|Debt Fund Mixed Fund||Not less than 60%Not less than 45%||Not more than 40%Not more than 40%||NilNot less than 15% &
Not more than 25%
|Low riskSteady Income –Lower to Medium risk|
Should you invest in LIC Flexi Plus ULIP?
The decision is purely financial and I would like to leave this with you, with the following thoughts.
- What if after 2 years you feel that none of the investment fund is performing as per expectation? Or you would not be able to pay further for personal reasons then would you be comfortable enough in leaving the fund in discontinuation fund earning you saving bank a/c return?
- Debt investments perform differently in rising, falling and stable interest rate scenario. There are other debt instruments for short/medium/long term horizon available, which are more actively managed and have potential to deliver much better returns and having flexibility to switch as and when required.
- Even if you chose “Mixed fund” option for parking of funds (15%-25% equity exposure) in LIC Flexi Plus, would it be wise to invest with a 10-20 years horizon?
- Even though there is some sort of government backing to LIC but government interference has its own negative factors.
- I have presumed that readers of TFL are adequately insured and are convinced on buying term insurance… and if this is the case then would it be wise to pay more mortality charges.
- With the reduction of charges some may argue that ULIPs have now become cost efficient than Mutual funds in the long term, which is true to some extent. Personally I have always found the structure of ULIP very attractive. But on the other side I want investments to be flexible enough, on which cost effective, immediate and comfortable action can be taken as and when required and ULIP does not give me that flexibility. I mean I can go with index funds, now days there’s option of direct plan, direct stocks, Bonds, Fds or whatever investment instruments suits my risk appetite, goals, tax profile etc.
Many people are of the view that Financial Planners are against ULIPs but this is not true. We are not against or in favour of any product but it actually become difficult for us to map the goals of clients to such non flexible and costly products (though for few years). Anyone who’s having their basic financial planning, investments and goals intact can do anything with the surplus he’s left with if any. But it’s always advisable even to use that surplus with caution to factor in the uncertainty risk in financial plan.
Review of LIC Flexi Plus is done by Manikaran Singal, CERTIFIED FINANCIAL PLANNERCM – the views expressed herein are the author’s personal views.
If you have any query related to LIC Flexi Plus or any other insurance product – feel free to add in comment section.