Postmortem of LIC Samridhi Plus ULIP Plan

Yesterday night, I listened advertisement of LIC new ULIP on FM radio and in the morning, I thought of exploring more on this plan.

LIC has introduced its new ULIP Plan – Samridhi Plus. This plan offers payment of Fund Value at the end of policy term, based on highest Net Asset Value (NAV) over the first 100 months of the policy, or the NAV as applicable on the date of maturity, whichever is higher. NAV of the fund will be subject to a minimum of ` 10/-. This plan is available for sale for a maximum period of 3 months from the date of launch.

Sounds interesting? Highest NAV, Guaranteed NAV, available for short term, LIC trust, tax benefit – all these phrases will force you to sign application form immediately. But wait. Read below and then decide.

First try to understand the ULIP plan. Whenever, you pay premium in ULIP, certain amount of money will be deducted before investing in the fund you choose and certain amount will be deducted after investment. So, the money left after all the charges, is guaranteed in this plan. Let’s explore all the charges of this plan now.

Premium Allocation charges for regular premium

1st Year -> 6%

2nd to 5th Year -> 4.5%

Policy Administration charge:  30/- per month during the first policy year and Rs.30/- per month escalating at 3% p.a. thereafter, throughout the term of the policy shall be levied.

So, it will be Rs.30×12 = Rs.360 p.a. For a premium of Rs.15,000 p.a., it comes out to be 2.4% in 1st year.

Fund Management Charge – It is a charge levied as a percentage of the value of assets and shall be appropriated by adjusting the Net Asset Value (NAV) at 0.90% p.a. of Fund Value.

Guarantee Charge – A charge of 0.40% p.a. of the Fund Value shall be levied for the charges on LIC Smaridhi Plancost of investment guarantee.

There will be mortality charges also for providing risk cover. Ofcourse, there will be service tax+cess also on different charges. LIC has also reserved some of the charges mentioned above after the prior approval of LIC.

Now, after deducting all the charges at right time, LIC is giving your guarantee of THAT amount on maturity. Why LIC is not highlighting these charges in advertisements? It’s you as an investor has to understand these terms and conditions before putting your hard earned money.

I repeat again and again that if you want to create wealth, the best is to invest in equity diversified mutual funds for long term via SIP way and for life-insurance, opt for term insurance plan. Share your views / doubts in comments section below.

Postmortem of LIC Samridhi Plus ULIP Plan
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2 thoughts on “Postmortem of LIC Samridhi Plus ULIP Plan”

  1. All the insurance companies have these type of charges. LIC’s samriddhi plus’s charges are mentiond on LIC’s brouchers & are lower than that of other insurance companies charges of same kind. No one tell these charges on TV as its not feasible.
    Your statement “the best is to invest in equity diversified mutual funds for long term via SIP way” does not provide security or life cover & they too have some charges….
    So my views are Buy Insurance as it your family a security, buy LIC as its a trusted brand, & buy samriddhi plus as it gives returns as per highest NAV.

    1. There are many points which I mention in another way.
      1. You’ve already mentioned that its charges are lower than other insurance companies. My question why a customer pay charges, even if it is lower than other company?
      2. My complete statement on mutual funds ends with term insurance. Infact, I’ve already mentioned number of times on this website, that term insurance is must for every one. Regarding charges of MF, there is no entry load now and for long term, there is no exit load. The FMC charges are on average of 2% p.a., which is again very competitive. Above that, the returns of equity diversified mutual funds are far more than “best” ULIP funds. You can compare last 10 year results.
      And if you know the power of compounding, the difference of even 1% p.a. makes a LOT of difference on maturity amount.
      3. I’m not against ULIP. But for disciplined and long term investor, certainly equity diversified mutual funds and term insurance combination is a better way to create wealth. If you’re a person, who just withdraws amount now-a-then, invest in ULIP, that provides lock-in period & restrict you to alter your target.
      4. Last but not the least, all such “Guaranteed” funds invest a large portion of money in debt funds, to secure their profit. So, even if a person has a time horizon of 10-15 years, & higher risk-appetite, he will be FORCED to invest in debt funds to generate less returns. That’s not fair. Also, this “Guaranteed” return is on INVESTED amount i.e. premium – all charges – taxes and not on whole premium.

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