January to March are the months when people rush to make Tax Saving Investments. Insurance companies know this and they launch newer products to get a pie of this. Keeping with these traditions LIC has launched Flexi Plus – a Unit Linked Insurance Plan (ULIP).
LIC Flexi Plus – Features:
- Sum Assured is 10 times the annual premium
- Maturity Benefits payable irrespective of survival of the Life Assured during the term
- Partial Withdrawal after 5 years
- On Surrender of the policy, Policyholder’s Fund Value is payable. There is no Discontinuance Charge after completion of 5 policy years.
- Two funds to choose from – Mixed Fund and Debt Fund
- Four free switches allowed during a policy year
LIC Flexi Plus – Eligibility:
The table below shows the eligibility for LIC Flexi Plus Plan.
LIC Flexi Plus – Death Benefit:
- Immediate lump sum payment equal to the Sum Assured shall be paid to the nominee / legal heir.
- An amount equal to sum of all future premiums payable after the date of death shall be credited to the Policyholder’s Fund.
- On the Date of Maturity an amount equal to the Policyholder’s Fund Value will be given to the nominee/legal heir.
LIC Flexi Plus – Maturity Benefit:
- On Life Assured surviving the date of maturity, an amount equal to the Policyholder’s Fund Value is payable
LIC Flexi Plus – Investment Options:
LIC Flexi Plus has two options for investment.
- Debt Fund – This purely invest in debt funds and is suited for low risk profile.
- Mixed Fund – This would have maximum of 25% equity investment and rest in debt instruments. This is more risky than debt fund but is also more rewarding in terms of returns.
The details are mentioned in the table below:
Logic for Expected Returns:
The Debt Fund option above is similar to Debt: Gilt and Long Term Mutual Fund. I looked at the 10 Years return of funds from this category. It varied from 3.34% to 7.91% annualized. So you should expect similar returns from the LIC Flexi Plus – Debt Fund.
Similarly LIC Flexi Plus – Mixed Fund is similar to Hybrid: Debt-oriented Conservative Mutual Fund. In this case the 10 year return of funds varied from 7.19% to 14.33%.
LIC Flexi Plan – Charges:
The ULIP has the following charges
- Premium Allocation Charges
- Mortality Charges
- Policy Administration Charges
- Fund Management Charges
- Service Tax
- Switching Charges
- Miscellaneous Charges
The table below shows the details of all the charges:
LIC Flexi Plus – Benefit Illustration:
The benefit illustration on LIC Website is pathetic as its hardly visible. I tried out from other sources are here are the numbers:
- Age: 35 Years
- Policy Term: 20 Years
- Premium Mode: Yearly
- Premium Amount: Rs. 25,000
Fund Type: Debt Fund
- Maturity Value assuming Gross Return of 6% p.a.: Rs 7,67,825 (Net Yield: 3.93%)
- Maturity Value assuming Gross Return of 10% p.a.: Rs 12,43,436 (Net Yield: 8.05%)
Fund Type: Mixed Fund
- Maturity Value assuming Gross Return of 6% p.a.: Rs 7,57,196 (Net Yield: 3.80%)
- Maturity Value assuming Gross Return of 10% p.a.: Rs 12,24,777 (Net Yield: 7.93%)
The net yield has been calculated based on IRR function using excel.
The difference between gross and net yield is the expense. The significant point is Mixed fund with higher risk has slightly lower return in the benefit illustration. This is due to the higher fund management charge for mixed fund than debt fund.
Should you Invest in LIC Flexi Plus?
LIC Flexi Plus is a ULIP which invests in debt related instruments. Most of debt mutual funds have expense ratio in the range of 2% to 2.25% and its similar in case of LIC Flexi Plan (taking all the expenses in account). So the long terms returns from LIC Flexi Plus – Debt Plan would be in lines of Gilt Mutual Fund which might vary from 3.5% to 7.5% per annum. While in case of Mixed Plan the return would be in line with Hybrid: Debt-oriented Conservative Mutual Fund which has given 7% – 14% annualized return over a long period of ten years.
So if you plan to invest in this LIC Flexi Plus, it’s good to go with Mixed Plan. Other than this you can also look to invest in PPF which is also a tax saving instrument under sec 80C and gives tax free return of 8.6%. But also keep in mind that PPF returns are no more fixed and would change every year.
And below is the advertisement by LIC in all leading dailies: