Financial Daily from THE HINDU group of publications
Sunday, Mar 13, 2005
Financial Daily from THE HINDU group of publications Sunday, Mar 13, 2005 |
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Investment World
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Life Insurance Money & Banking - Life Insurance Columns - Insurance Corner LIC's Future Plus Nath Balakrishnan
A look at some of the key features of this plan.
Life cover
The plan can be taken with or without life cover. If the life cover is opted for, the amount can be five to 20 times the annualised premium amount. In case the single premium option is chosen, the life cover is equal to the premium payment. In case the policyholder dies during the premium payment term, the beneficiary would receive the value of the units if the zero life cover option is chosen; the payout would be the value of the units plus the sum assured in case life cover is opted for. An annuity can also be taken with this amount.As the objective of such plans is to ensure that the policyholder has a sizeable corpus to fall back on in his post-retirement phase, it would be a good idea to start investing early and over an extended time period; if complemented with a pure term plan, mortality charges under this plan could be minimised, which means a greater proportion of premiums would be channelled towards investments. On survival till maturity, the policyholder would receive the value of the units under the plan. He has the option to commute one-third of this amount and buy an annuity with the remaining amount; alternatively, he may buy an annuity with the entire amount.
Rider options
A couple of riders can be attached to the basic plan. They include the Accident Benefit Rider and the Critical Illness Rider. The sum assured under this rider cannot exceed the life cover opted for under the basic plan.
Fund options
Investments can be made in one of four funds, all of which fuse asset classes in differing proportion and, hence, have a varying risk profile. Four switches between these funds are free of cost in a policy year. The Bond Fund guarantees a yearly compounded addition of three per cent, provided the minimum policy term is 10 years and investments are not switched out of this fund. No guarantees are available on investments made into the other fund options.
Charge structure
Charges are levied across multiple heads. The premium allocation charge, which determines the amount available to purchase units, depends on the mode of premium payment (single or regular) and the amount of premium paid. Other charges associated with mortality, riders and administration and those pertaining to fund management, service tax and a flat fee are all effected by cancellation of units. The plan has zero bid-ask spread.
Add-ons
Under this plan, should the policyholder have excess funds at his disposal in any policy year, the same may be invested into this plan as a top-up. Further, one could also choose to reduce the extent of life cover, provided it remains above the minimum cover limit specified. The plan also has a feature whereby life cover is maintained even if premiums have been unpaid. Surrender after more than two policy years (under both the single and regular premium options) does not attract any charge. Partial policy surrender is not applicable, nor are loans available under the plan.
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