Life Insurance Corporation (LIC) has recently launched for the first time an ULIP called Endowment Plus. This is an insurance cum savings plan. In this plan, one can choose the level of insurance cover within the limits, which will depend on the mode and level of premium you agree to pay.

Individuals have a choice of investing premiums in any one of the four types of investment funds available. Premiums paid after deduction of allocation charge will purchase units of the Fund type chosen.

Units will be allotted based on the Net Asset Value (NAV) of the respective fund as on the date of allotment. The NAV will be computed on a day-to-day basis and will be based on investment performance.

Investment of Funds

The premiums allocated to purchase units will be strictly invested according to the investment pattern committed in various fund types.

Eligibility Conditions:

(a) Minimum Age at entry: 7 (age last birthday)
(b) Maximum Age at entry: 60 years (age nearer birthday)
(c) Minimum Maturity Age: 18 years (completed)
(d) Maximum Maturity Age: 70 years (age nearer birthday)
(e) Policy Term: 10 to 20 years
(f) Minimum Premium
Regular premium: Rs. [20,000] p.a.
Regular premium: Rs. [1,750] p.m.
Single premium: Rs. [30,000]
(g) Maximum Premium
Regular premium: Rs. [1,00,000] p.a.
Single premium: No Limit

What are the additional features of the plan?

Switching

You can switch between the four fund types for the entire Fund Value during the policy term subject to switching charges, if any.

Increase / Decrease of risk covers

No increase of covers will be allowed under the plan. You can, however, decrease the risk covers, without reducing the level of premium, once in a year during the Policy term, provided all due premiums under the Policy have been paid.

Revival

If due premium is not paid within the days of grace, a notice shall be sent to you within a period of fifteen days from the date of expiry of grace period to exercise the option for revival within a period of thirty days of receipt of such notice.

If you exercise the option to revive the policy, then the arrears of premium without interest shall be required to be paid.

What are the charges under the Plan?

Premium Allocation Charge is the percentage of the premium deducted towards charges from the premium received.

The balance constitutes that part of the premium which is utilized to purchase (Investment) units for the policy. The allocation charges are as below.
For Single premium policies it is 3.3%
For Regular premium policies

What are the risks borne by the Policyholder?

LIC's Endowment Plus is a Unit Linked Life Insurance products which is different from the traditional insurance products and are subject to the risk factors.

The premium paid in Unit Linked Life Insurance policies are subject to investment risks associated with capital markets and the NAVs of the units may go up or down based on the performance of fund and factors influencing the capital market and the insured is responsible for his/her decisions.

What are the benefits to the policyholder?

Death Benefit

Higher of Sum Assured and the Policyholder's Fund Value shall be available as death benefit.

Maturity Benefit

On the Life Assured surviving to the end of the policy term chosen, an amount equal to the Policyholder's Fund Value is payable.

Conclusion

Individuals with low risk can look for this plan as it is unit linked plan. The returns expected can be moderate. Expenses in the plan are high, which is costly when compared to mutual funds investments. Liquidity is an issue with ULIP plans, also there will be penalty and charges involved.

Ideally, one who is looking for mainly insurance should avoid this scheme as it will hardly take care in case of a death of the policyholder. Returns would depend on the type of scheme chosen. If you chose the equity oriented schemes, returns could be significant and so could losses. If it is a debt dedicated scheme the returns could be more steady.

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