<div><em>Life Insurance Corporation of India (LIC) recently launched Ulip which may not suit all. Here’s why? <strong>Sunil Dhawan</strong> explains</em></div><div> </div><div>Life Insurance Corporation of India (LIC) has recently launched ‘New Endowment Plus’, a unit linked insurance plan (Ulip). This Ulip from LIC comes after a long gap of almost 32 months since the new Ulip guidelines were put in place in January 2014. </div><div> </div><div>Fund performance of LIC’s equity fund has not been as per peers but certainly high compared to return generated in traditional plans. Also, equity exposure of New Endowment Plus is capped at 80 percent of premium and term of is capped at 20 years. For longer term goals, the plan may not be suitable. Considering these, there could be other flexible, better performing and unrestrictive Ulips in the market to look at. </div><div> </div><div><strong>Fund Plays:</strong> Out of the four fund options, the one that allows maximum exposure to equities in the Growth fund whose mandate is to have not less than 40 percent and not more than 80 percent in equities. The performance of Growth fund of ‘Endowment Plus’, an existing Ulip of LIC is shown below. As because other funds are 100 percent equity-funds, the actual comparison cannot be made but sill it gives an idea as to how the fund performance of LIC has been over the years. If the Ulip is not giving an opportunity to the investor to participate fully in equities, the result is there for the potential buyer to see as per the table below.<br><br><img alt="" src="http://bw-image.s3.amazonaws.com/ulip-lrg.jpg" style="width: 638px; height: 195px; margin: 1px;"></div><div> </div><div><strong>Whom does it suit:</strong> Ulip suit those investors who may not be financially inclined to keep protection and investment needs separate from each other. And their expectation for returns is high than what is being offered in traditional plans such as endowment or money-back. Ulips being market-linked have potential for high real return. </div><div> </div><div><strong>The horizon:</strong> The maximum term of New Endowment Plus is 20 years. Being market linked plan, a Ulip helps meet different needs at different life stages. Even if someone holds New Endowment Plus for entire 20 years, a new Ulip might be required to be bought after its term ends. Read here, as to why and how a single Ulip can be enough for a lifetime.</div><div> </div><div><strong>Features:</strong> Similar to all other Ulips, the basic sum assured would be higher of 10 times the annualised premium and 105 per cent of the total premiums paid. At the time of maturity, the policyholder gets the fund value. LIC has reduced the entry age from 7 years as per earlier Endowment Plus to 90 days in the new Ulip New Endowment Plus. </div><div> </div><div><strong><span style="color:#ff0000;">Read Also:</span> <a href="http://businessworld.in/banking-finance-personal-finance-more-magazine/make-it-count">Make It Count</a></strong><br><br>While the term period remains same as 10-20 years, the maximum age at which policy will mature has been reduced from 70 to 60 years in New Endowment Plus. The reason for this could be to make people invest in New Endowment Plus for the benefit of their children needs. Even in that case, it’s always suggested to buy the policy in parent’s name and keep the children as nominee. One may attach the accident benefit rider to the plan.</div><div> </div><div><strong>What’s the cost:</strong> The Premium Allocation Charges are 7.5 per cent of premium in first year, 5 percent on 2nd to 5th year premium and thereafter its 3 per cent of premium. The other charge is that of Policy Administration charge which is deducted till maturity. The fund management charge is .7 per cent. LIC has it seems reduced the mortality risk charges in New Endowment Plus compared to what it charged in Endowment Plus. Here’s the breakdown:</div><div><br><img alt="" src="http://bw-image.s3.amazonaws.com/graphic-lic-2.jpg" style="width: 655px; height: 230px; margin: 1px;"><br> </div><div> </div><div>What’s in a name? Can the name be misleading? In insurance, there could be two major categories of plans- Endowment or Market linked Ulips. Now, if a plan is termed as New Endowment Plus, merely going by name, it appears as Endowment plan. But in reality it’s a Ulip. If LIC’s reach and policyholder’s base is largely into traditional plans, the name probably plays around the bush. Not only LIC, HDFC Life too has a similar plan titled Endowment Super, which actually is a Ulip. Regulator should take note of this and avoid brewing up of confusion in the already tainted market of insurance selling. </div><div> </div><div><strong>What to do: </strong>The fund performance has not been stellar. Also, the exposure to equities is restricted to 80 per cent, the actual allocation could be even lower. Do not invest in New Endowment Plus with the expectation of high returns in short period. If your goal is less than ten years, stay away.<br> </div><div>Under the new Ulip guidelines, the costs in Ulips are capped hence maturity fund values of more than one Ulip would show up the better Ulip. So, if one has to invest in New Endowment Plus, keep a term of ten years or more. Ask the agent to generate illustration benefit based on your age, term, sum assured and compare with at least 2 other insurer’s illustration. Compare the fund values and then decide. </div><div> </div>
