Today LIC is launching a new plan called “Wealth Plus”, an unit linked insurance plan (ULIP) having a term of 8 years. As usual, here is my review on this plan with inputs from a development officer working with LIC based in Bangalore. On this blog you can also read about other ULIP products available in the market by various insurance companies. This plan comes with an option of choosing from either of a single premium or 3 years payment term. LIC Wealth Plus plan will be available for three months from 9th February 2010 and the plan closes for sale after those initial three months. There after the funds collected will be invested in equity market, implying that the risk is only medium.
Let us take a look at the salient features of this plan:
- Gauranteed return of highest NAV of the first 7 years or the 8th year NAV, whichever is higher.
- 8 years of Policy term
- Either 3 years premium payment term or single premium as per client’s choice.
- Minimum single premium of Rs 40,000 and Minimum Yearly premium of Rs 20,000.
- Risk cover of 5 times of the annualized premium or 1.25 times of single premium.
- In case of death during policy term, the plan returns basic sum assured plus fund value
- Extended risk cover for 2 years even after term end.
- Partial withdrawal allowed at any time after 3 years.
- Accident Benefit Raider (EDAB) allowed at a nominal charge of Rs 0.50 per 1000
Age Limit:
People in the age group of 10 to 65 years can avail this plan by paying a minimum premium as mentioned above. Maximum premium has no restrictions.
Risk Cover:
Policy holder’s risk is covered for a minimum of 1.25 times of the premium paid through single premium mode. The maximum risk cover under single premium for age less than 40 years is 5 times the premium, while the same is 2.5 times if age is below 50 and 1.25 times for ages above 50. Under the regular premium mode the minimum risk cover is 5 times and the maximum cover is 10 times the annual premium for ages below 50 years.
Returns:
This plan guarantees to pay the policy holder the higher of the highest NAV reached in the first 7 years of its term or the 8 th year NAV. But this guarantee of highest NAV can only be availed if the policy holder completes the term of the policy and of course, a charge is levied for this guarantee at the rate of 0.35% of the fund value.
The plan comes with an extended life cover for a period of 2 years after end of the term. You can surrender the plan even within three years, but the amount will be only paid after three years from date of the policy as per IRDA restrictions and there are no surrender charges.
As a maturity benefit policy holders are offered the highest NAV for units in the fund, provided the completion of a term of 8 years under the plan. Death benefit equals the sum assured plus the fund value during the term of the policy. For death during the first two years of the plan, and also after the term of the policy during the extended risk cover period the sum assured is only paid as the benefit.
Revival:
Instead of charging higher premium for risk cover based on age every year, This plan charges only a level premium based on age at entry. But in the case of revival of a lapsed policy, the age at date of revival is used to arrive at the risk cover premium. Revival can be done only within 2 years from date of lapse and Rs. 500 is charged for revival.
Partial Withdrawals:
The plan does provide a feature of partial withdrawals wherein, withdrawals can be after three years from commencement of plan and the maximum withdrawal is restricted to twice in a year. Other condition to be satisfied to make a partial withdrawals is that there should be a minimum of one annual premium left in the fund, and the minimum amount to be withdrawn must not be less than Rs.2000.
Loan Facility:
Loan is not granted in this plan as one can avail the same via partial withdrawals. The plan also does not provide for payments of top up premiums.
Charges:
* Allocation Charges:
Single Premium: 5% up to 4 lakhs and for above 4 lakh the charge is 4.5%.
Regular premium: 12% up to 2 lakhs on first year and thereafter 2.5% for remaining years of the policy term. For premium below 4 lakhs the charge is 11.75%, and 11.5% for less than 7 lakhs and above 7 lakhs, the charge would be 11.25%.
* Guarantee charges at the rate of 0.35% of the fund value.
* Fund management charges at the rate of 1% of the fund value.
* Policy administration charge at the rate of Rs 60 monthly for the first year. Rs. 25 for the second year, Thereafter escalates on Rs 25 at the inflating rate of 3% every year.
* An accident rider benefit is offered with this plan, by paying Rs.0.50 per thousand risk cover. But the accident raider can only be availed by individual’s within the age of 10 yrs to 62 yrs.
My Take on this policy:
There is nothing new offered by LIC through this wealth plus plan except an extended insurance cover for 2 years after the policy term. Though the charges look moderate when compared to similar plans in the market like SBI Life Smart ULIP or Bajaj Allianz Shield Plus, I am basically not in favor of combining insurance with investment. For reaping best benefits always separate out insurance and investment. To get a better idea of what that means, please do read through some of the articles on this blog related to investment. Having said that I request readers to compare and contrast similar ULIP plans wrt various features provided before deciding on buying a policy.
Ram says
Thanks Jayant, It’s really help me .One more question as I want to invest 80 k (Eighty thousand) so can you suggest me how many fund I should choose.
Thanks,
Ram
Mohan says
Ram, see my reply above to one of your comments. Hope that helps.
haseen taj says
I want to know the if we say them to transfer the amount after the maturity of the policy to our account is there any facility without giving nomination/i want to know shall we give two nominees I want the reply if possible please
Mohan says
Please get in touch with a nearby LIC development officer to know details on nominations. I don’t have any info on that. Usually the companies do provide double nomination with a target % split between the two people.
Debayan says
Thank You so much.It is a very good policy…………..
Reshma says
Thank you so much. I got to know the details which were not so clear from LIC agent about this wealth plus. I have gone through the comments as well. I can make out one thing for sure, there are a bunch of folks who un-necessarily taking a dig at you. Never mind about them… you are doing a great job and keep it up.
Mohan says
You are most welcome! Thanks 🙂
Sampath says
Mohan,
Thanks for the analysis, but this is a very ameturish analysis and does not touch up of any facts. I am not saying you are wrong or right but this is of no value.
Mohan says
It is up to you to decide. I can’t help if this wasn’t of any value to you. What exactly are you looking for?
Gaurav Doshi says
Hi Mohan
as i am a bad investment/tax planner.
because of the last moment tax planning.
tomorrow i was going to take lci wealth plus plan.
But not now. Wonderful blog. i will rather prefer hdfc tax saver elss.
Mohan says
Hi Gaurav, Thanks for your compliments.
Jayant Bhat says
15-18 yrs Excellent horizon for Equity products. Nobody can tell you how much you will earn. Try any good Mutual Fund like Reliance Growth or SBI Magnum or any of your choice. Personally, I have got more returns from Deutsche Bank Growth fund than the one I have invested in REliance or SBI. Also, look at some dividend yielding MF’s
But If I were you, I would definitely invest 100% of money directly into Equity and relax for 18 years to see the huge yield that I would get. Why do you need Fund Managers if you have such a long horizon. Just invest in A group companies like RIL, NTPC,ICICI or HDFC Bank, WIPRO, TATA Power or Motors, TCS. Just discuss with some good advisor and finish the deal. Forget Insurance product for that matter.
Ram says
Hi Mohan,
I want to invest 80k for 15-18 years.Could you plz suggest me where I invest so I can get good return.
Mohan says
Ram, there is no straight answer to your question. Please read through various articles on this site related to investment and financial planning. That should give you a fair understanding to know what your options should be.
jayant bhat says
Dear Mr. Shekhar,
If I have to run my consultancy, I have various modes of promotions. And what is the harm in promoting my business by educating people about right choice of product.
Atleast I dont point out fingers on others without giving any clarfications. This is a discussion forum and there are bound to be debates which only help co readers. For instance, Sumanth has worked so hard to point out his views and I am trying to bring forward my views. Those who read the same, would get some more clarity about the product. My aim is to educate people to buy the product as per their needs.
Now that you have pointed fingers on Mohan who is running this wonderful and balanced blog, Please let us know what great knowledge you have about insurance and this product. Instead of pinpointing, would it not be prudent to share knowledge so that we all understand if we are missing out something.
I am sharing my knowledge based on my personal experience in Insurance. Please note that I am not an agent but a planner. Hence I would always talk about all financial products alongwith insurance. Agents sell their products as per their needs and not the clients needs. Also, I never talk of rebates which is illegal and never would offer rebates to sell product of my choice.
Shekhar says
Hi Jayant,
I apologize for my comment which was negative in all sense. Yes I have some knowledge on the subject. I have never doubted your subject matter expertise. In fact you are the one who has answered/helped many on this blog. But since this was not your own blog, personally I felt some of your comments like offering offline help as promotional efforts. nonetheless, I apologize again and let’s my comment do not take away any of your positive energy to help others. Much success to you.
jayant bhat says
Please dont appologise or so. I believe in knowledge sharing. But all knowledge cannot be shared for free of cost and beyond a certain point it becomes necessary for people to understand that just because they want to save tax or similar kind, they should not be investing money blindly,plan properly. hence whereever I feel I recommend that people should seek professional help. Planning needs a lot of brainstorming sessions with personal information which cant be discussed on open blogsites.
Wherever I felt I can place my views in between, I have answered to some queries which were posed for Mohan. Whats the harm in replying to queries. If there is a difference of opinion then It can be sorted out by discussions and not by accusing. Anyways, I have got the message right. This would be last comment on Mohan’s Blogsite. But this was the best period of learning.
Mohan says
Sad to see you go off. All the best.
Shekhar says
Sorry to say-Mohan your knowledge is inadequate. It shows while seeing your abrupt and vague responses to the earnest readers. Though I must admit you have picked very valuable topic on the blog. Thanks.
Mr. jayant Bhat want to push his own consultancy services by opposing this plan. good going!
Mohan says
Shekhar, I take your comment in a progressive manner. Counter back is an easy choice, but I see your point as a regular reader on my blog. It is not always possible for me to dig deep into the numbers of a specific product and to post my thoughts. For that matter, I may not even find so much of time. YES, it is a fact.
Blogging is something I do as a hobby and not as a profession. If you are looking for indepth knowledge from experts, I am sorry to say I am not one as you have rightly pointed. I am only providing a platform to ensure my readers get an overview of the product and gaining much deeper understanding of the product is left to an individual’s discretion.
I try to answer most of the comments based on availability of my time. I don’t see anything wrong in saying I shall get back with proper analysis by crunching in the numbers provided by Sumanth in his question. Don’t know what is so ‘abrupt’ in that comment.
Regarding the fellow commenters on their consultancy, it is up to an individuals discretion again. Your point is taken. I shall update my comment policy on the About page soon.
Shekhar says
Mohan, I apologize for my commnet earlier.
I truly appreciate your commendable efforts on running such valuable blog(as I mentioned earlier) and educate people. But there are people with varying knowledge, I observed that though answers were offered to people with limited knowledge, no concrete help/comment was offered to people with layman knowledge. This is big risk as they have money and any “agent” can exploit them easily. And as blog owner I felt they should have been answered first. That’s my personal opinion though. I wish you great success.
Mohan says
Human is to err.. that is okay! Everyone has their own views and thoughts. It is good to have differences and that brings in collective thoughts from various perspectives. Thanks.
Sumanth says
Dear Mohan,
Hope you had time to read my posts.
Can you provide your opinion on the below
Can you check the above calcualtions & clarify the below 2 points
1. I am claculating that NAV of 25 would be required by Wealthplus to break-even the returns offered by 8% fixed income. Assuming that LIC will be very cautious in their investment portfolio, since highest NAV clause is involved in this fund, What are the chances that NAV of Wealthplus will touch 25.71 (Give your ratings on scale of 1 to 10 for this question)
2. Is the moratlaity chagre of 2.75 per thousand per annum correct(for a person aged 35 yrs) . (Can you please get clarifications from LIC on this)
Regards,
Sumanth
Mohan says
Sumanth, I had a quick glance of all your comments. You have bloated up your questions with too many numbers… It needs a good attention before I comment, it will take a while to reply to your queries. Hang on.
Mohan says
Sumanth,
I went through an exhaustive study of your calculations. Here is my observation on what you have missed.
* You have taken the charges at flat rate of 30% of the premium paid. You need to understand that the mortality and other similar charges levied are on top of the existing value at the end of each month/year. So, the net left over would be much lesser than what you have calculated. This indirectly means, your fund needs to perform a higher NAV to offset the charges and make a profit.
* Considering the moderate risk as mentioned by the site, I doubt if the fund would return 12% annualized profits.
* I hardly see any difference in returns between Wealth Plus and FD except the said insurance cover. I don’t want to get into numbers since it is all imaginary as one wants to be because guessing is no good way to calculate things when it comes to investment through linked plans like these.
* I also had a look at LIC site for benefit illustration. There they have added up the interest generated on the fund value for a given year on the same year total towards the beginning itself before calculating fund value. Isn’t that incorrect to show bloated numbers?
I presume to have provided enough points to think upon to arrive at the returns.
sumanth says
Dear Mohan,
– Calculations provided before were done with a rule of thumb so to say. The idea being to get some direction; not to bloat numbers
– After adding up all the numbers, charges was working out to 25%.(Which is actual). To arrive at one flat rate, 20% safety factoy has been applied thereby taking the charge to 30%
– Perhaps we are missing a point here. The charges towards insurance in wealth plus seem nominal. So having insurance with investment does not seem to be a bad idea in this policy.
– There are other pvt players who are part of the bandwagon in providing similar schemes such as “Guaranteed Highest NAV”.
– I have a pdf document comparing various “Guaranteed highest NAV” schemes available in the market & LIC seems to be offering fairly reasonable deal . Is there a way to attach documents in this blog?
Please note that I am not any insurance agent & the intention is to have a fair view of this policy to enable readers to make a rational decision
Regards,
Sumanth
Mohan says
That sounds interesting. Feel free to pass on the document provided there aren’t any copyright issues associated with it. I shall host it on my blog and probably everyone will get to understand these ‘Guaranteed Highest NAV’ plans better! you can mail me on mohan @ mohanbn . com {remove the spaces}
Sumanth says
– Where is the question of giving 13 to 15% to somebody coming from?? Refer my previous post, for single premium , charges works out 8% for first year & average 2.5% for the subsequent years. (First year charges can be offselt slightly from the agent’s rebate)
– Can you please throw some more light on private RBI which offer 12% return. Many of the readers would be happy to park funds in places which offer assured 12% return
jayant bhat says
I meant Private listed companies which offer 12% per annum. There are many. I can forward list of around 40 companies. One thing I would like to correct is that one gets tax rebates on Bank FD’s with lock in period of 5 years.
Rebate is something which is not legal and hence something which is not worth to comment. Regarding 13% charges, I am referring to regular premium.
jayant bhat says
@2.75 per 1000 rates if i am allowed to get enhanced cover,then it is ok for me.but if i am forced with only 5 times cover then my take would be same: pure term insurance + Mutual funds.
If investment is my aim,then why should i give around 13-15% to somebody to manage my funds.rather i pay 2.5-3% charges and invest the saved money too.
Why not invest in private RBI regd FD’s which offer 12% returns or banks which offer 8%. That is return is anyways guaranteed.FD’s with 5 yr lock in period qualifies for tax benefits too. The keeping safety in mind, i would recommend term plan or normal ulip with enhanced life cover and FD’s with guaranteed returns of around 8-12% per annum.
Sumanth says
Dear Jayanth,
Firstly, I agree that the premium allocation charges are higher for 3 years payment term. (Premium allocation charges is 12% for the first year for 3 year payment term policy as compared to 5% for single premium policy)
Secondaly, there are fixed charges such as polciy admin charges which is the same for 20K investment & 5 lac investment. Hence if you calculate percentage of the charges for lower premium policies, you end up with higher charges & vice versa for higher premium policies.
Thirdly, if you need to compare the charges towards cover, take only the portion which is charged towards insurance cover (which is 2.75 per 1000 for a person aged 35 years)rather than taking all the charges (Premium allocation + Charge for cover+ Service charge etc etc)
This will provide a balanced view on the policy
In my analysis, I had taken one time investment of 5 lacs & the total charges was working out to 8% for the 1st year (due to the premium allocation charges) & average 2.5% from the second year till 8th year (Refer my earlier posts). (The high charges of 8% for the first year can also be offset due to the rebat provided by agents :-)))
Finally, it all depends on the priorities & risk taking ability of the investor.
– If one is looking only for cover, go for pure insurance policies, who charge around 2.5 to 3.0 Rs per 1000
– If one is looking for fixed assured returns, go for fixed investment which provides around 8% intrest (compuned annually) for a tenure of 8 years
– If one is aready got sufficient insurance cover & if Wealth plus offers additional cover at a nominal rate of Rs. 2.75 per thousand what is the harm in opting for it
– If one needs a slighlty higher returns than fixed deposit & is wary of investing in mutual funds / stock market, why not look at Wealth plus which offers highest NAV of 7 years. Afterall, this policy needs to achieve a NAV of 25 approx (Refer my earlier posts for details on this) to break-even the returns of fixed deposit. Added to this he/she also benefits from the additional cover.
All I am asking experts in this field is to provide a balanced view instead of brushing off a scheme by saying ” Never mix investments with insurance”
This is my one paisa view & am open to other dimensional views from all
Regards,
Sumanth
jayant bhat says
I think you did not get my point:
Illustration of Wealth Plus on their site shows that total charges on a premium of 20k is 3181 and I have not considered a mortality charge of 195 Rs and service charge of Rs. 366. This is for a sum assured of 1 LAc which you cant increase. So the total charges come to around 15.90%. Even in second year, the total charges minus the mortality and service charge comes to Rs. 935 which is 4.67%. Even in the third year these extra charges comes to 1024 i.e.5.12%.
Now if you consider only the premium allocation charge and policy admin charges: year I Charges =3120, 15.6%, yearII Charges:Rs.800, 4%, year III Rs.809,4.04%,
All i want to say is Look at the cover that you are getting for all the policy admin charges,premium allocation charges and gurantee charges that you are paying: Rupees One Lac. One easily get Rs. 10 lac cover from other companies in 3100 odd amt and from LIC you can get around 9 lac cover. Depends on how much cover you want.so if one wants 5 lacs cover he can pay around 1500 rs for cover.
Remaining money can be invested in FD or Mutual Fund.These days, those who are seeking for safety, bsli has launched Capital Protection Oriented Fund Series 1, where just like these guaranteed nav products, 80-100% money is parked in debt funds depending on market conditions.
In all cases, one would get more return through a combination of Term Plan plus mutual fund. alternatively, if one wants more cover and investment option in one product, the person can invest in some good ULIP like Met Smart or similar product in industry where cover can be increased and at the same time money can be invested in the same product.
Your views.
Jayant Bhat says
Hi Sumanth,
Suppose at age 30, I want to invest 50k and Invest in Wealth Plus,then I get a cover of Rs. 2.5 lacs, pay around 14% towards charges for getting an annual estimated return of around 8%. So upfront, around 41k are invested and that too in majority would be dumped in money market.
Instead:
i opt for a term cover of 10 lacs(consider it from LIC ),then the premium would come to somewhere around 3900 pa(Ofcourse this is costly as compared to other term products)
Then If i invest in some safe mutual fund(These days protection plans in mutual funds too), i save a lot on admin charges and other residual charges incurred in wealth plus. charges in MF would be around 2-3%.
So as per me the ideal answer to Wealth Plus would dump and better invest in the following combination:
Out of 50k,invest 4k in getting 10 lacs cover and invest around 45k in Mutual Funds as per your risk apetite.
Outcome: More life cover, more investible money.
Sumanth says
Hi Jayanth,
– From your calculations, premium for 10 lacs cover works out to 3900 pa which is Rs. 3.90 per 1000
– In wealthplus, insurance cover is offered at Rs. 2.75 per thousand. This makes it cheaper than term cover!
Well, actually, the rates for term polciies are cheaper than those mentioned by you.. (Refer my comment provided above regarding rates of one such policy – Amulya jeevan)
In short, my view of Wealthplus is as under:
– The rates charged for insurance cover seems to be more or less inline with industry standards.
– The promise of highest NAV seems better when we compare it to investing in mutual funds, where we need to closely montior the progress & keep on switching from one fund to another.
– The charges in Wealthplus as per the calcualtions submitted above, works out to around 8% for the first year (due to premium allocation charges) & around 2.5% average for the subsequent years (Which is true even for Mutual funds)
Your views please
Regards
Sumanth
Sumanth says
Dear Mohan,
To add to the previous calcualtions, please find below premium rates for amulya jeevan (Pure insurance plan without any survival benefit)
Premium rate for a person aged 35 yrs per thousand per annum
Policy term Premium rate per thousand
5 Rs. 2.43
10 Rs. 2.64
So in LIC wealthplus, if the mortality rate is pegged @ 2.75 per thousand it seems to be inline with industry standards for pure insurance policies & LIC do not seem to be charging high rates towards insurance cover.
With all these calculations, I am not convinced why one should not mix insurance + investment is one policy is available which balances both these requirements
Am I missing something
Your inputs will help me
Regards,
Sumanth
Nilotpal Dutta says
Dear Mohan,
Thanks for this excellent analysis. Can I invest under this plan with an option for no insurance coverage at all? Kindly reply asap, so that I can decide before the plan closes. Thank you.
With regards,
ndutta
Mohan says
Sorry, I fail to understand your intention here… why do you want to put your money into ULIP when you don’t need insurance cover? There are better options if your purpose is investment alone!
Sumanth says
Dear Mohan
I have made small comparision between LIC Welath plus & fixed deposit for a sum of 5 lacs (one time investment)
– Fixed deposit will yield 9 lacs approx. at the end of 8 years (@ rate of 8%)
– In LIC, Wealth plus, total Charges towards premium allocation, guarantee charges, policy admin charges, service tax, etc etc is as under (In % per year)
-8.01%
-2.34%
-2.38%
-2.42%
-2.46%
-2.51%
-2.57%
-2.62%
0.00%
0.00%
– Nett charge works out to 25%. However, there is a clause in LIC website wherien certain charges might go up during the policy tenure. So I have assumed total charges to be 30% during the tenure period.
– With the above, I have applied a factor of 0.7 on the investment of 5 lacs & you would get 3.5 lacs worth of Units at the end of tenure which is 35,000 Units
– Now for getting a return of 9 lacs (to break-even the fixed deposit return), the highest NAV needs to be 9,00,000/35,000 Units = 25.71
– To achieve a NAV of 25 at the end of 8 years, the fund needs to grow at a rate of 12% p.a
Can you check the above calcualtions & clarify the below 2 points
1. Assuming that LIC will be very cautious in their investment portfolio, since highest NAV clause is involved in this fund, What are the chances that NAV of Wealthplus will touch 25.71 (Give your ratings on scale of 1 to 10 for this question)
2. Is the moratlaity chagre of 2.75 per thousand per annum correct(for a person aged 35 yrs) . (Can you please get clarifications from LIC on this)
( For 1 lac investment, sum assured = 1.25 lac. Amount deducted towards moratality charge = 2.75 * 125K = Rs. 343 per annum which works out to 0.34% of the investment
Compare this charge with Convertible term assurance policy (Plan No.58) for 2.5 lacs S.A, for aperson aged 35 yrs, premium works out to 1,712 per annum for PPT of 7 years. This works out to Rs.6.85 per thousand per annum)
Regards,
Sumanth
Jayant Bhat says
If someone has convinced you on performance of ULIP’s itself, then you can opt for market plus without cover.
Gaurav says
Sumanth, don’t forget the fact that returns from Market Plus will be taxed as you will buy this plan without cover
Hari says
Dear Mohan – if looking at this as an investment product, after considering all the expenses, one can summarise this product as paying 87% (for the single premium option) of the highest NAV.
If this policy were taken in 2001, an investor would have seen a return of 87% of the highest NAV – which was about 500% of the 2001 levels. If the investor had bought the index, the NAV by the end of the downturn of 2008/9 would have been only 250% above the levels of 2001. This would have been a great investment product.
If I were to look purely for an investment option and am fine with locking my funds for 8 years, there still is no pure investment product that offers this highest (or 87% of the highest) NAV option.
Am I missing something?
Amol says
Thanks Mohan
Ur Review had bought a gud clarity for me but i would appreciate n thanku if you suggest equally gud options to us..
Sumanth says
Dear Mohan,
To add to the previous analysis, Fixed Vs Wealthplus analysis is below for an mount of 5 laces invested in 2010
– Fixed (@ 8% p.a cumuluative) : works out 8,91,738 at the end of 8 years
– Wealthplus : Total fund charges for 8 years works out to around 30% approx. Hence put a factor of 0.7 to arrrive at number of units. For 5 lacs innvestment you would approx get 35,000 Units at the base price of 10 rs .
Now, to break even the fixed deposit, wealth plus has to touch a NAV of 25.4 in these 8 years.
Don’t you feel Wealthplus can touch NAV of 25.4 in 8 years. Even if it touches arouund 30, the difference would be the added profit as comapred to fixed deposit added to the fact that you would also get isnurance cover which is not true for fixed deposits
Your thoughts please
Regards,
Sumanth
Sumanth says
Dear Mohan,
First of all, let me clarify that I am not a LIC agent.
I trust you have done an excellent research on this topic.
However, I fail to understand why insuarance mixed with investment is a bad option. In this case, mortality rate is at 2.75 Rs per 1000 for a person aged 35 yrs. This works out to o.34% of the initial invest ment cost.
Furthermore, I have computed for single premium of 5 lacs & have arrived at the following total charges (Premium allocation + Motality charge+ Policy admin charge+Guarantee charge + Fund manager charge + Service tax) based on the rates provided on LIC website. Below rates are for 1st year, 2nd year, 3rd year & so on & so forth
Total cumulative charges
-8.01%
-2.34%
-2.38%
-2.42%
-2.46%
-2.51%
-2.57%
-2.62%
0.00%
0.00%
Can you please clarify if the above charges are high as comapred to industry standards.
Regards,
Sumanth
Hitesh says
Hi!
Thank Mohan! I have read the entire post. I have like a plan “Reliance Highest NAV” with Single Premium option of Rs. 30000/-.
I have spoken to one of my frined and he said go for LIC Wealth plus as Compared to Reliance Highest NAV as Reliance is not a trustworthy company.
Reliance manipulates a lot; however on the same part I have seen that only Reliace is number one in wealth generation or profit maximization.
jayant bhat says
all companies are the same. What is the guarantee that there is no manipulation in LIC. Why go by rumours. If you go by the amount of mis-selling that LIC has done since inception, you will change your statement about trustworthiness of other companies. By the way, my stance on all sorts of NAV guarantees is that they will yield less returns but for those who are looking for extreme safety of money, these products are good.
Soumya says
@Mohan: That’s a nice bit of review with the calculation from Mr Shashidhar. But I tend to agree with the view that Life insurance should be separate from your investment. If you are seriously trying to make money from your premium it is never gonna be better than a pure investment but whats the harm in making some extra ,also getting a good insurance cover. So , don’t stress yourself over how much money your insurance will make when you are alive, just put the money and effort in some other ‘pure’ investment route.
Jayant Bhat says
I agree with your views. But try converting some ULIPs to higher sum assured and you will notice that in some cases mortality charges are cheaper than the term plans. But by far I am in agreement with what you and Mohan say:Go for Insurance for Life Cover purpose and not investments purpose.
sandeep arora says
please tell me about(in detail)LIC MARKET PLUS
Mohan says
Sandeep it is an age old policy.. i mean it was introduced long back. I haven’t really looked at minute details of LIC Market Plus. Let me go through it sometime soon and get back with a review on it.
chanakya says
Good Review….
Keep It up….
Mohan
Mohan says
Thank you!
Amudan says
I was today working out on NSC investments, just to opt for a simpler but guranteed product. For th same 3 lacs (being invested over a period of 3 years, as per Wealth Plus or similar ULIP product), we get more than double the principal in 10 years. For eg. the 1 lac invested in NSC in 2o10 gets us 160000 in 2016 and the same reinvested in NSC again (@an approx int of 8.15%), it gives us more than what these ULIP products will give. No risk, no market watch, no complicatin and no tension. Additionally, we can get Loans and the return is guranteed…. what more we want. Instead if we invest in PO MIS the annualised interst is even more , nearly 11+%.
Dear Mohan… can we correct me if am wrong.
Mohan says
Bingo! you got it right except that the PO MIS offers you 8% interest pa and if you maintain a savings account with PO, then you will get another 5% bonus on the maturity of the fund. So in net it works out to be around 8.9% pa and not 11+% as you have mentioned. Any traditional investment modes with government backing is a safe bet in my view provided you know the returns and if they are inline with your needs.
Sanjay Jain says
Today I read one good Article “Review of LIC’s Wealth Plus & How Agents are Misselling it”
Even Mohan Nellore added his comment “ the fact is that the investors are still going by what the agents are selling and not taking a wise decision of verifying the facts before purchasing.”
Very rightly said, thanks a lot Mohan.
Sanjay
Mohan says
I am glad you liked the article and the details. Keep visiting back for more. For all those who haven’t subscribed to email notification, feel free to do so to stay tuned about the new posts in this blog.
Yogesh says
HI,
I am planning to invest for shrt term(3 years) with max benifit and min risk.
The intention behind the investment is to make up mony to buy home after 3 years. I can invest 50k per annum.what policy will be better for me?
Please help..
Jayant Bhat says
If you have a horizon of 3-5 years, then strictly I would recommend you to enter any of the RBI approved FD accepting Pvt Institutions.
Dont make the mistake of getting into mutual funds or ULIPs as it is highly unpredictable business.
Yogesh says
Thanks Janyant…
But I am confused about chosing between Recurring Depoisit and Fixed Deposit..Which will provide me higher benifits? How do they help me in getting home loan after 3 years?
Jayant Bhat says
You will get home loan on your income and repayment capacity.
Since you said you want to utilise the money in 3 years for house purchase, I recommend that you opt for Fixed Deposit for a period of 3 years if you want to invest lumpsum amount and incase of monthly or any other mode of investment other than lumpsum, go for RD.
My services of specific product recommendation are chargeable and hence I cant disclose the same over here. You can get in touch with incase you need any professional help. But yes, I attend Mohan’s Blog to learn,to share my experiences and any little technical expertise that I ve gained from the financial industry.
Yogesh says
But If I invest in RD I wont be getting tax benifits too..
So If I have invested 50000 per anum i ll be gtting 8% interest but there will be a tax of 10% on it…So how it is benifitial for me?
jayant bhat says
8% return on 50,000/- is 4000, so the return is not taxable. also decide first whether you want full money back with guarantee in 3 years or you want to save tax. prioritise your options and act accordingly.
Yogesh says
Actually i want to save tax with fair returns for future use.
So does ULIP will help me to achive this?
Or do u know any policy which is short term (3 years) and will provide me a fixed return and which i can use for tax saving?
jayant bhat says
You can contact me for professional guidance.
Alternatively you can check the following yourself it is possible:
You would have to analyse how much tax would you be saving,how much you would be paying. Sometimes it is better to forego some tax amount rather than investing in wrong option.
As on date, I feel FD is the best alternative for you if you want money back in three years.
Yogesh says
Suppose want to invest 50k per annum on monthly basis in RD. I will be getting a benifit of say 8% i.e 54000 after one year.But at the end of financial year as I cant get a tax benifit on this money(50k). So i am lossing 5000. so how does RD help me to save money rather than ULIP??
Jayant Bhat says
I think it is a matter of proper analysis.
You will have to analyse tax liabilities and prioritise your requirements as I commented earlier.Invest in risky products and save measely tax or be prepared to get good results or bad results – a blind game. Especially, since you wish to utilize that money to invest in a house.
jayant bhat says
First identify your needs as per the financial planning basics. Do you have sufficient life cover, sufficient whole life cover, sufficient mediclaim in addition to what your employer provides. Then do you have provision for sufficient safe long term savings instruments like PPF,After that do you have enough emergency funds in hands, Then think of investing ULIPs or MFs.
In ULIPs, think if you can cope up with the rides of Market and be patient investor/observer for 8-10 years. decide if you can manage the swithovers else invest in balancer.
If you cant bear the ups and downs of Market, then Proucts like MArket Plus is for you. Market Plus would give a minimum return of 5 percent p.a. though you may be told about the phenomenal returns by your advisor. I was speaking to an expert in ULIPs of US, who has seen more than 20 years of Life Insurance in US and India in totality. We came to conclusion that people should ideally expect around 8-10 percent per annum in this guaranteed products.
Then why should one opt for the same and not FD’s: Double benefits of Tax: Save Tax while buying Insurance which you can save in FD too AND Save tax on maturity amount too. You have to shell out tax on returns of FD.
Always buy any investment too only after being inquisitive about one question:
Do you really need it.
Dont park your funds just to save tax.
Dr Captain Ramchandani says
sir,
i have invested in lic wealth plus policy,but after reading this i want to go back.can u please tell me if i can cancel the policy,if yes than how much money can i get back.plz reply.
thanks.
jayant bhat says
You can return the policy doc within freelook/cooling-off period. Cooling off period is the policy of insurance cos to return policy document within 15days of receipt of the Policy Document in your hand.
Do it personally as I have experienced instances that agents delay the returning of doc to the company after the deadline wherein the policy cant be returned.
If at all, you would very minimal amount but you would be saved from agonies life long. One very funny instance strikes me with this, one of my friend returned his policy and that was time when market suddenly recovered from a huge loss. He had invested 1 lac and instead of loss he made a profit of 5ooo in one months time.
You can get in touch with me for best recommendation of products out of 11 insurance companies and more importantly which are more suited as per your needs.
Vaibhav says
I am visiting this blog for first time.Its really Educative.i have discuss about both Shield Plus and wealth plus.in my thought….amongst d two….wealth plus is more gud as various charges to be deducted are less compare to Shield plus.less charges means more money to invest and more growth.Whether market is Up or Low…Its for all.But whats the Investment portfolio of the company helps one in gaining in d market…please suggest if i am thinking Right?
K.C.Choudhury says
Dear Sir,
What amount will I get after 8 years if I invest 100000 rupees in March 2010.
Thanks
Krishna
Praveen says
Today I went to JP Nagar 2nd phase(Bangalore) main road where one of LIC’s office is there. Its a big building and they kept huge boarding covering the building of LIC Wealth Plus plan highlighting the highest NAV feature.
The hoarding is huge like an Rajinikanth cutout on releasing day of his movie 🙂
Mohan says
It is everywhere Praveen! most of the road median ad signage boards are running LIC wealth plus ads. LIC is certainly promoting this plan real BIG 🙂
Raju says
Hi Mohan thanks for the information….
But still i have a confusion whether to invest for LIC wealth plus or bajaj alianz.
Can u please help me out.which is safer and more profitable.
Mohan says
Dear Raju, I have provided review on both the products you have mentioned. ie., LIC Wealth Plus and Bajaj Allianz Shield plus. I suggest you consider your investment planning to decide on which one suits you the best. It would be wrong to say by suggesting to go for one of the 2!
Amudan says
Dear All.
I am going through this blog for the first time. What an educative trail! I came across this blog while collecting details from various sites, to understand more on this “Plus” ULIP products. Thank God, i would have otherwise just invested some money in this but was postponing for some reason. Good that i got to go through the entire series of mails on this product. I am convinced now to look for a better product.
Special Kudos to Mr. Mohan for sincere efforts in initiating such an enlightening discussion.
Thanks once again…Amuda
Mohan says
Thanks for your kind words Amudan. The whole intention here is to ensure that the customer gets to know the product well before purchasing. I am glad this article was of some help to make a decision. If you liked the articles on this blog, feel free to subscribe for an email notification, which keeps you posted with new articles on this blog.
Jayant Bhat says
Ofcourse you can check. What better the proposal form itself which most of us tend to ignore the fine prints:
Prohibition of Rebate: Section 41 of the Insurance Act, 1938 states:
1) No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the Policy, nor shall any person taking out or renewing or continuing a Policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer.
Provided that acceptance by an insurance agent of commission in connection with a policy of life insurance taken out by himself on his own life shall not be deemed to be acceptance of a rebate of premium within the meaning of this sub-section if at the time of such acceptance the insurance agent satisfies the prescribed conditions establishing that he is a bona fide insurance agent employed by the insurer.
2) Any person making default in complying with the provisions of this section shall be punishable with a fine which may extend to five hundred rupees.
LIC agents (now some private insurance agents too)have been giving rebates time and again spoiling the industry.Generally this is done to attract the client, the agent continues to earn renewal premium till the policy gets renewed for nothing. Ideally an agent should give you all after sales service (and ofcourse all pre sale information) which he never does and just earns commissions for (mis )selling the product which is not needed by the client purely for his benefit. A prudent advisor would adopt a policy of mutual benefit i.e. sell the product that is actually needed and inturn take commission.
Survey says that Insurance sales is amongst the top paid professions and though rebate is prevalent worldwide, It is said the top advisors are the one who have never given rebate. Advisors run on top ranking by the service that they offer to the clients and not by offering rebates.
Gaurav says
Thanks Jayant!
Your comments clears the scenario.
Also if getting rebate is illegal, I won’t try for that from now. but I would like to recheck it once more from somewhere. (Not that I don’t trust you, just that never heard such a thing before. I have seen all (LIC) agents giving some rebate in first premium to attract customers)
Mohan says
I don’t see any harm in availing rebates from such agents provided you have zeroed on a perfect financial product for your investment/insurance. As long as you can save some money through agents, why not make the best out of it?
Jayant Bhat says
But the best part is Mohans Blog is getting more and more reviewers and commenters which shows readiness of readers to spare some time to think where they want to invest, what went wrong in past and how to ammend not so great steps taken in investments.
Congrats Mohan on your successful mission of creating financial awareness.
Mohan says
Thanks for chipping into answer Gaurav’s query. I am glad to have readers like you to enlighten other readers with a new dimension to understand the products better! It wouldn’t have been such a nice place without readers like you! Thanks for your contributions here!
Jayant Bhat says
Hi Gaurav,
Good to see curious brains raking ULIPs of all kinds. This gives all of us more thoughts to pep into well marketed Guaranteed NAV ULIPs with hidden venom.
My view on:
Point#1:time difference matters a lot. there would be roughly a difference of min 30% in your account value in 3 productive years of Sensex.More coz the company’s liability of guaranting NAVs ends and thereon you can switch your funds on your own.
point#3(1): Investment pattern is not same in Guaranteed and non guaranteed ULIPs. In Non Guaranteed policy owner has choice of switches which is the best advantage where in the guranteed,company reserves all rights and to safeguard what is guaranteed to you,it places max money in money market where one cant expect returns more than 3-4% per annum.
Point#4:Extended Life cover-great mktg tool. with all the money earned from you,they are giving you a mustard size life cover. for a premium of 20k,u get life cover of 1lac.you might have given around two year premium towards charges by the end of 8 years.so for 40k earned from you they are giving you cover of 1 lac which you can get for probably 2k.
Point#5: Illegal is the word and wont prefer to comment on rebates. However,2% rebate from not so great product Versus 20% return from a good product. Its your hard earned money, so you are the best judge where to invest.
But the best part is
Gaurav says
Mohan, you are right in saying that insurance and investments should not be mixed up. I have mentioned that in my post that I don’t like to invest in ULIPs but for the sake of analyzing and curiosity, I was evaluating merits and demerits. So I was wondering if you could give suggestions or comments for the points (3+5) I have thought and written in the above post. As in where I am thinking wrong or if I have missed something. Beginners like me are prone to miss things.
Gaurav says
Was thinking about demerits or this plan.
1. We expect low returns as maximum NAV is guaranteed. But I was wondering if fund managers could do the same with other ULIPs as well who do not guarantee the returns.
2. Guarantee charges grow high as your Fund value grow high.
3. Same investment for Guaranteed as well as non-Guaranteed returns. ( I am not sure about this, may be I missed or Mohan/Jayant Bhat missed :P)
But when I compare this policy to other similar ULIPs I find it charming as
1. SBI smart life – term 10 years, guaranteed return of Max NAV in 7.5 years or at the end of 10th year whichever is maximum. Similar policy from Kotak Mahindra, as per I remember, they give guaranteed return of Max NAV in 7 years or at the end of 10th year whichever is maximum. My question here is how worthy is this time difference. In my view markets will grow up in any spam of 2.5-3 years with a very very high probability. But this probability might not be very high in spam of 1 year. so wealth plus seems better than others in this context.
2. Lesser Minimum premium limit (Rs. 20,000).
3. Partial withdrawal allowed.
4. Extended Risk cover for 2 more years.
5. Also what if my agent gives me back an amount of 1% to 2% of the single premium policy? (Dont ask me about this, my agent gives me everything he gets from LIC on my policies, ofcourse he wont give you such discounts)
I dont think taking highest NAV daily would be a great advantage practically.
Could you please advise me on all the points, I myself don’t like ULIPs but just for the sake of curiosity.
Thanks
Gaurav
Mohan says
Gaurav, every plan would have its own merits and demerits, LIC wealth plus is no different. When compared with similar products in the market, LIC looks better. But the whole idea of mixing up insurance and investment by falling into the trap of highest NAV is a bad idea. See some of the finance related articles on this blog to know more.
jayant bhat says
Even I wanted to say, God Only Knows. I request you to go through all articles in this site. quite educational. you will come to a conclusion yourself after going through certain articles. even if you go through the chain of comments, answer would be clear.
By the way, I would recommend you invest in either LIC’s market plus or Birla’s Platinum Premier. LIC’s market plus is pure ULIP and BSLI’s Platinum premier has two options: one Guaranteed NAV like Wealth plus and second one is self managed option which acts like normal ULIP in which funds can be switched over as per your choice.
ajay potar says
If I invest Rs40000/- single preimium in LIC’s welth plus, how much amout should get back after 8 yrs, could you please give me resolution along with calculations? I do not want exact amt but at least I expect good returns.
Mohan says
Please see my reply to previous comments.
satya says
dear mr gajanan laxman dhamal…. the right answer for your question is ………
” GOD ONLY KNOWS “
Mohan says
I do agree to certain extent and the intended pun 😉
Gajanan Laxman Dhamal says
if i pay 20,000/- yearly for 3 years what is maturity amount after 8 year
Mohan says
You should follow the brochure and product details for your age to know it better
satya says
Mr. shashidar,
i could not understand your calculations.please…………
Mohan says
Well, Shashi did try his bit to understand by putting dummy figures into NAV for multiple years, I will try to format his comment with columns format to make it more legible.
Sasiy says
Any idea how much one will get at the end of 8 years for 40000 invested
Shashidhar says
Hi Mohan
Nice writeup !!
Did my own calculations for 3years premium payment at 4000 Rs per month, with an guestimate NAV trend (based on other similar LIC fund inducted in 2001) , and the charges applicable…
The YOY returns are laid out as below
Year Prem ALLC NetPrem NAV #ofUnits FV GC FMC PAC MC
1 48000 5760 42240 10.5 4023 42240 148 422 720 84
2 48000 1200 46800 11 8277 91051 319 911 300 182
3 48000 1200 46800 14 11620 162684 569 1627 309 325
4 15 174304 610 1743 618 349
5 17 197544 691 1975 927 395
6 15 168494 590 1685 1236 337
7 18 209165 732 2092 1545 418
8 20 232405 813 2324 1854 465
Total 232405 4473 12779 7509 2556
MaturityVal 205088.9461
CHARGES
GC .35% of FV
FMC 1% of FV
PAC 1st year 60PM
2nd year 25PM
3rd year onwerds till 8th year it wud be (25*1.03*(N-2))*FV per month
MortalityCharges 2% of FV (age : 31)
AllocationCharges 12% of premium per year ( first year)
2.5% of premium per year ( second year onwards)
Hmm … and the same ammount (48000*3) in an FD with interest componded annualy at the rate of 7% would be 245557.55…
So seems like we would be just adding up to LICs profits rather than growing our hard earned money….
warm regards
shashi
Mohan says
Good to see your calculations shashi. You have shown it with your numbers while I simply restrained myself with words because I didn’t wanted to take imaginary numbers for illustration. Good that you have come up with calculations on reutrns from LIC Wealth plus… If your imaginary numbers prove correct, then LIC Wealth plus wouldn’t be Plus anymore… instead it would Wealth Minus 😛
Ganesh Natarajan says
I think you agreed not to mix investment and insurance. But then i do not understand why you want to compare the returns from an insurance product with an investment instrument. Even if the return from Wealth plus is much lesser than that of an FD, it is still worth it. Because, there is no death benefit in an FD, whereas Wealth plus has and that too the Sum assured + fund value. The maximum benefit in this product will be realised only when death occur (God forbid) and that’s the whole idea of insuring. If you survive, you will still get your money (unlike in a term insurance), though much lesser (or may be more, who knows). So, there is no point in comparing returns with FD and other products.
Jayant Bhat says
The best combination would be term insurance plus any other investment tool. If somebody is taking life insurance product then ideally it must be to ensure livelihood continues in your absence too.
5 times the premium is a very measely cover that the life insurance company offers. Check the mortality charges and you will find that in that mortality premium the life cover that will come in term plan will turn out much higher.
Gaurav says
Hi,
I have gone through the complete review and completely agree that we cannot expect much from the LIC Wealth Plus plan basis the fact; we are not aware about the exact fund allocation. We can only target marginal higher return (1 % – 3 %) from the debt funds
At the same time I don’t think it will be right to compare LIC Wealth Plus plan with Fixed Deposit Scheme as it is not not apple to apple comparision
But still if someone wants to compare please consider the following pointers
– LIC Wealth Plus plan is an Insurance Policy, it provides insurance by deducting a mortality charge, don’t consider this charge while comparing with FD as you would have paid this charge as premium if you would have brought any term assurance plan + Fixed Deposit together
(This is not on fund value, it is a fixed charge – Shashidhar, just wanted to correct your calculation)
– With LIC Wealth Plus plan you are paying regular premium of Rs. 4000 p.m for 3 years, while comparing it with Fixed Deposit you will have to buy one FD every month worth Rs. 4000 for next 3 years with the reducing term of 1 month to get the maturity on the same day (8 years from now)
(The return may vary from month on month as per the market condition, hence you are not sure you will get flat 7% return on all FD’s you purchase)
The final amount will be much lesser than Rs. 245557.55
– Don’t forget to consider the fact that returns from FD will be taxed
Once you factor in all the above pointers you will not see much difference in the final fund value through both the instruments,
LIC Wealth Plus may prove better with the returns Shashidhar has considered for LIC Wealth Plus Plan (but for returns it is too early to comment)
It completely depends on the investor to choose between the instrument of investment; after all it is investors hard earned money.
Basic principal of investment is higher the risk higher the returns. Now the investor has to decide his risk appetite
LIC Wealth plus fund has a very moderate risk hence the return will be lower than other equity funds, other equity linked funds have high exposure to equity hence may have higher returns.
shishupal negi from agustyamuni says
sir, i want to invest rs.100000 in various investment policies . is wealth plus policy of lic (ulip)better or ppf?
Mohan says
Dear Shishupal,
the maximum amount your can invest in ppf is 70,000/- per year, a point to be noted is the term. The term of ppf is 15 years. Interest will be paid on your contribution by compounding it every year. PPF makes sense for those who seek long term investment. At the current rate of PPF interest is of 8%. I have given all the details about the Wealth plus in my article. Also, you can consider Sashi’s calculations below as an indicator to choose your options 🙂