Ads are roaring in TV sets, News Papers, Bill Boards about LIC Wealth Plus Unit Linked Insurance Policy partly because this is a limited period policy (news is that this will end on 9th of May, 2010) and partly because LIC is aiming to make this Policy as big as Jeevan Aastha which was a super hit in its time. In this scenario, let’s review what LIC wealth plus has to offer:
LIC wealth plus policy requirements
The Minimum entry age (last Birthday) is 10 and the maximum entry age (nearer birthday) is 65 years.
This is a closed ended Unit linked policy with a maximum policy term of 8 years from the date of commencement of policy. If needed, you can extend the life cover by 2 years after the 8 year term ends.
The premium can be either paid at a single time or annually (for only 3 years), the minimum for each of which is Rs.40000 and Rs.20000 respectively.
Sum Assured values
In LIC wealth Plus policy, the minimum SA for single premium mode is 1.25 times the premium and for 3 years premium mode it is 5 times the annual premium.
The maximum SA depends on the age at which the Life Assured (LA) enters the policy.
For Single premium mode, if the LA enters the policy at the age of 40 or below, the maximum SA is 5 times the single premium.
Similarly, entry between 41 – 50 years gives 2.5 times the single premium and entry between 51 and over gives a maximum SA value of 1.25 times the single premium (which is equal to the minimum SA).
For 3 year annual premium payment mode, if the LA enters the policy at the age of 50 or below, the Maximum SA is 10 times the annual premium and if the entry is made on 51 or above years, the SA will be 5 times the annual premium (equal to the minimum SA).
Specialty of LIC Wealth plus policy
LIC wealth plus is a typical ‘investment safeguarding’ plan that protects your investment from the fluctuating market conditions. Now this is important, ‘the return on your investment will be the total number of Units you have at the end of the policy term multiplied by the highest NAV recorded by the plan in the first 7 years (on a daily basis) or the NAV at the end of the Policy term, which ever is the highest’.
Returns over Investment in Wealth plus fund
That important statement may taste like candy; however, what is not clear is in what types of funds will LIC be investing the premium amount?
The ‘Investment of Funds’ table in LIC tells us nothing more than the fact that the risk level is Medium. Obviously when you see a policy claiming ‘it safeguards your investment’, the risk level of investment should be low, if not medium at the most. And when the risk level is low to medium, (most) funds are surely going towards Government Bonds, Securities, money markets and the like and (very less) funds to equity markets. This invariably means that the returns on your investment will fluctuate around the normal Bank (interest) rates.