Tuesday, January 15, 2013

LIC's latest pension plan - New Jeevan Nidhi Plan No. 812 :

Life Insurance Corporation has unveiled latest pension plan named New Jeevan Nidhi. It is a deferred pension plan which is launched on 2nd JAN 2013. LIC's New Jeevan Nidhi Plan is a conventional with profits pension plan which provides for death cover during the deferment period and offers annuity on survival to the date of vesting.

Policy loan: No loan facility will be available under this plan

Death Benefit: 1) If Death occurs with in first 5 years of starting LIC JEEVAN NIDHI, Sum assured along with guaranteed accrued bonus will be paid 2) If Death occurs after 5 years, Sum assured, Guaranteed bonus and vested reversionary bonus*1 and final additional bonus*2.

Maturity Benefit: 1) Pension: Option to purchase pension on maturity 2) Reinvest: Maturity proceed can be reinvested into single premium deferred pension plan. Back dating - Allowed within same Financial year.

Eligibility conditions:

Revival:  A policy may be revived within a period of 5 years from the date of First Unpaid premium and before the date of vesting by payment of Arrears of premium plus Interest and subject to continued insurability.

Surrender:  The policy can be surrendered at any time on payment of at least 3 years' premiums and after completion of at least 3 policy years but before the date on which annuity vests. The Surrender Value payable shall be the higher of Guaranteed Surrendered Value and Special Surrender Value. The Surrender proceeds shall be utilized to purchase an immediate annuity product or a new Single Premium deferred pension product from LIC. *1: Reversionary Bonus shall be added from the 6th policy year onwards till the end of the deferment period and at such rates as may be declared by the Corporation. *2:Final Additional Bonus shall be payable either on vesting or on earlier death at the rates declared by the Corporation.

Service Tax: Service tax, if any, shall be as per the Service Tax laws and the rate of service tax as applicable from time to time. The amount of service tax as per the prevailing rates shall be payable by the policyholder on premium(s) as and when the premiums are paid.

Cooling-off period: If the Life Assured is not satisfied with the 'Terms and Conditions' of the policy, he/she may return the policy to the Corporation within 15 days from the date of receipt of the policy stating the reason of objections. On receipt of the same the Corporation shall cancel the policy and return the amount of premium deposited after deducting the risk premium, expenses incurred on medical examination and stamp duty.

Exclusion: Suicide: This policy shall be void if the Life Assured commits suicide (whether sane or insane at that time) at any time within one year from the date of commencement of risk and the Corporation will not entertain any other claim by virtue of this policy except to the extent of a maximum of 90% of single premium paid excluding any extra premium (in case of single premium policies).


Nikhil A.J (BE I.T.)

LIC Advisor,

Mob: 09970909917

Email: nikhilaj_007@yahoo.co.in

LIC’s Flexi Plus (Plan No. 811)

LIC’s Flexi Plus (Plan No. 811) :

What are the highlights & features of LIC’s Flexi Plus?

• LIC’s Flexi Plus is a unit linked plan.
• Policyholders Fund Value is payable on Maturity.
• Maturity proceeds are payable even after settlement of Death Claim
during the term.
• Benefits in event of the untimely death of the Life Assured within the
policy term -
o Immediate payment of Full Sum Assured
o An amount equal to sum of all future premiums is credited to the
Policyholders Fund.
o Future premiums need not be paid by the beneficiary
o Policy continues upto the Date of Maturity
o Policyholder’s Fund Value Payable at Maturity
• Four (4) free switches per policy year.
• Partial Withdrawal allowed after completion of 5 policy years.

What are the benefits payable on Maturity?

On the date of Maturity an amount equal to the ‘Policyholder’s Fund’ value is
payable. This amount is payable irrespective of the survival of the Life

What are the benefits payable on death of the Life Assured?

The nominee/legal heir shall be entitled to an immediate payment of a lump
sum amount equal to the Sum Assured.
The policy continues upto the date of Maturity but no future premiums are
required to be paid by the beneficiary. On the contrary, an amount equal to the
sum of all future premiums due after the date of death shall be credited to the
Policyholder’s Fund. For example, let us take the case of a policyholder who has
opted for a 20 year term with a yearly premium of Rs.25000/- . If death occurs
after payment of say 1 yearly premium i.e 25000x1=25000/-. Then 19 years (20-
1=19) remain for completion of policy term and the future premiums due
against the policy shall be 19*25000=475000. In LIC’s Flexi Plus, this
amount(Rs.475000) shall be credited to the Policyholders Fund. The units shall
be allocated at the unit price applicable for the fund type opted under the
policy as at the date of booking of liability for death claim. On the date of
maturity the Policyholders Fund Value of shall be payable.

Can I withdraw amount from the policy when I am in need of money?

A policyholder can partially withdraw the units at any time after the fifth
policy anniversary. Partial Withdrawals may be in the form of fixed amount
or in the form of fixed number of units. A policyholder should have to a
minimum balance of two annualized premiums in the Policyholder’s Fund
while opting for Partial Withdrawals. Partial withdrawal shall not be allowed
to nominee/ legal heir after death of life assured.

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 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
  1. Maturity Value assuming Gross Return of 6% p.a.: Rs 7,67,825 (Net Yield: 3.93%)
  2. Maturity Value assuming Gross Return of 10% p.a.: Rs 12,43,436 (Net Yield: 8.05%)
Fund Type: Mixed Fund
  1. Maturity Value assuming Gross Return of 6% p.a.: Rs 7,57,196 (Net Yield: 3.80%)
  2. 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 instrumentunder 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.


Nikhil A.J (BE I.T.)

LIC Advisor,

Mob: 09970909917

Email: nikhilaj_007@yahoo.co.in