LIC is launching a ULIP product LIC SIIP (Plan No.852) from 2nd March 2020. What are the features and benefits and who can invest in this product?
It is a ULIP Plan and as per LIC’s claim, it is unique in many ways. Let us how it is unique.
LIC SIIP (Plan No.852) Features and Eligibility
First let us look at it’s features and eligibility.
As this is the ULIP Plan, let us see the charges of LIC SIIP (Plan No.852).
The great two features as per LIC are as below:-
# Return of mortality charges at maturity
# Guaranteed Addition as a % of Annual Premium on completion of certain years.
LIC SIIP (Plan No. 852) – Should you invest?
# Why SIIP-I am not sure why LIC opted this name 🙂 Is it to compete with the Mutual Fund industry where the concept of SIP is very much famous and many investors think SIP is a product not a way of investment. I am not sure why this mad rush of choosing a product name-calling SIIP.
# GUARANTEED Addition:-LIC claiming that it is first of it’s kind that ULIP is offering some guarantee. However, there is no clarity as of now on when they pay it. Let us wait for clarity. However, as per my knowledge, it hardly charges the return equation.
# Return of Mortality charges at maturity:-It is one more gimmick to attract customers. How much will be the mortality charges of LIC’s such product? Above that what will be the value of such mortality charges when the policy mature down the life after 20 years or 25 years? It is just a peanut. I am not sure why LIC opted for this feature. Is it to showcase that Term Life Insurance products offer the return of premium and hence we too do it in ULIP?
# Charges:-Even though LIC claim that there are no policy admin charges, however, you have to pay premium allocation charges and fund management charges. Fund Management Charges are as high as around 8% for 1st year for offline policies and 3% from 6th year onwards.
Even if we consider the online plan, the cost is still high compare to the mutual fund industry. I think to compete with Mutual Fund industry with respect to expense ratios and portfolio exposure clarity, ULIPs must change its complete view.
# Death Benefit:-In case of the death of the policyholder, the nominee will receive higher of-basic sum assured, fund value or 105% of the premium paid. However, if you separate insurance with investment, then in case of the death of the policyholder, the nominee will receive both invested value and also the life insurance claim from term life insurance. Hence, if one is looking at this product as a Life Insurance, it is completely a waste.
# Option to receive the death benefit in installments:- This it seems now became a trend among all insurance companies to pay the death benefits in installments. Do remember that this is not something they are doing with care of your family members. There is a cost involved to each services. Hence, never be in such a trap of fancy features.
# Comparison of LIC’s Endowment Plus to LIC’s SIIP-If you compare older ULIP Plan of LIC Endowment Plus to this product, I am unable to find any big changes when it comes to cost. In LIC Endowment Plus, the policy admin charges used to be in the range of start with 0.35%. However, in LIC’s SIIP, this is NIL. But other charges like Fund Management Charges and Premium Allocation charges are much higher. Hence, by claiming no Policy Admin charges, indirectly LIC collecting the same by other way.
Conclusion:-Stay away from such high cost illiquid (up to 5 years) product which combines insurance and investment. If you are really fond of the equity market, then go ahead and experiment with low-cost Index Funds or Direct Mutual Funds and buy Term Life Insurance (even you can go ahead with LIC’s Term Term policy). However,
LIC launching one more new plan on 2nd March 2020. Refer the same at “LIC Nivesh Plus (Plan No. 849) – Single Premium ULIP Review“.