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 cost 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.