Life Insurance Corporation’s (LIC) new scheme – New Endowment Plus, a unit linked insurance plan, offers both investment and insurance options to its customers. The New Endowment Plus policy (number 835), offers investment avenues in both low risk debentures and high-risk private equity depending on the risk appetite of the customer. This plan offers up to four free switches in a policy year. With a policy term of 10 to 20 years, New Endowment Plus allows partial withdrawal after 5 years of the commencement of the policy.
Under this policy, each premium paid by the policyholder is subject to premium allocation charge. Units will be bought with the allocated premium. The policyholder’s Fund Value will be subject to deduction of specific charges. Units will be allotted and cancelled based on the Net Asset Value (NAV) of the fund. The NAV, computed on a daily basis, will be based on the investment performance and fund management charges of each fund type. There is no bid-offer spread as per this policy.
Features of LIC New Endowment Plus:
The features of LIC New Endowment Plus - ULIP are listed below:
|Basic Sum Assured||10 X annualized premium or 105% of the total premiums paid, whichever is higher|
|Minimum premium||Rs.20,000 (yearly), Rs.13,000 (half-yearly), Rs. 8,000 (quarterly), Rs.3,000 (monthly)|
|Maximum premium||No limit. Annualized premiums should be paid in multiple of Rs. 1,000 for all modes except monthly. The premium for monthly should be in multiples of Rs. 250.|
|Commencement of risk||If the age of the Life Assured at entry is less than 8 years, the risk will commence either one day before the completion of 2 years (of policy commencement) or one day before the policy anniversary coinciding with or after completion of 8 years, whichever is earlier. If the age of Life Assured is 8 years or more at entry, risk will commence immediately.|
|Switching||Policyholders can switch between fund types during the policy term. Upon switching, the amount is switched to the new fund opted for. Four switches are allowed in a policy year free of cost. However, subsequent switches will incur a charge of Rs.100 per switch. Upon receipt of an application for a switch, a policyholder’s Fund Value (after deduction of switching charge, if any) will be transferred to the new fund.|
It is the cost of cover taken at the start of a policy month by cancelling policyholders’ Fund Value proportionately. The monthly charges are 1/12th of annual mortality charges.
Mortality charge will depend on the difference between the Basic Sum Assured or Paid-up Sum Assured and policyholder’s Fund Value on the date of deduction (after deduction of other charges, only if, the Basic Sum Assured/Paid-up Sum Assured, is more than the Fund Value).
|Increase or decrease in benefits||No increase or decrease of benefits is allowed. Policyholders can cancel the accidental benefit rider during the policy term. If the rider is cancelled, it cannot be revived at any time.|
|Settlement option||Policyholders may choose this option one month prior to the maturity date.|
|Premium Payment Mode||Regular premium can be paid either in yearly, half-yearly, quarterly or monthly instalments. Customers should note that monthly instalments are allowed via ECS only.|
No partial withdrawal or switching is allowed after commencement of settlement period. Partial withdrawal is possible only after the fifth policy anniversary (provided all premiums are paid) subject to the following:
For minors, partial withdrawals are allowed only if Life Assured is 18 years or above.
Partial withdrawals can be a fixed amount or fixed number of units.
Partial withdrawal is allowed subject to a minimum balance of three annualized premiums (from 6th to 10th policy year) or 50% of Fund value on withdrawal date, whichever is higher. Likewise, three annualized premiums (from 11th to 20th policy year) or 25% of Fund value on the withdrawal date, whichever is higher. A partial withdrawal charge of around Rs. 100 is deducted by cancelling the appropriate number of units. The deduction will be made on the date on which partial withdrawal is done. If partial withdrawal is made for two years from the date of withdrawal, the Basic Sum Assured or Paid-up Sum Assured will be reduced to the extent of partial withdrawal made. Upon completion of two years from the withdrawal date, the Basic Sum Assured will be restored.
|Grace Period||A period of 30 days is allowed for payment of yearly, half-yearly and quarterly premiums while 15 days is the grace period for monthly premiums. If the Life Assured dies within the grace period but prior to premium payment date, the policy will be valid. The death benefits will, therefore, be paid after deduction of all applicable charges.|
|Revival||If due premium is not paid within the grace period, policyholders will get a notice|
|Cooling off period||If policy holders are not satisfied with the Terms and Conditions of the policy, they can return it within 15 days of policy stating the reasons. LIC will then return the amount of premium after deducting proportionate risk premium for the period, medical examination expenses and stamp duty charges.|
Benefits of LIC New Endowment Plus - Unit Linked Plan :
The benefits of LIC New Endowment Plus are listed below:
Upon death of the Life Assured before the maturity date the following benefits are payable.
- Death before commencement of risk: An amount equal to Policyholder’s Fund Value will be paid.
- Death after commencement of risk: An amount equal to the higher of Basic Sum Assured or Policyholder’s Fund Value will be paid. Basic Sum Assured is equal to 10 x annualized premium or 105% of the total premiums paid, whichever is higher.
- Charges such as policy administration charge, mortality charge, accident benefit charge and service tax will be paid to the nominee in addition to the death benefit.
If the Life Assured survives the maturity date, an amount equal to the Policyholder’s Fund Value is paid. The maturity benefit is paid either as a lump sum or in equal instalments.
Linked Accidental Death Benefit Rider
LIC’s Linked Accidental Death Benefit Rider can be opted for within the policy term provided the minimum outstanding policy term is 5 years. This rider will be available till maturity date. However, this will not be available on the life of minors. It will be available from the policy anniversary after completion of 18 years of age. If a policyholder opts for this rider, an additional amount equal to accident benefit Sum Assured is paid in the event of death due to accident. Accident benefit charges will be deducted at the start of the policy month. Policyholders have the option to cancel this rider during the policy term. If this rider is cancelled, it cannot be revived during the policy term. If the basic policy is not in force, this rider will stand terminated. While this rider may not be revived in isolation, it can be revived along with the basic policy during the revival period.
- Accident benefit charge: This covers the cost of the accidental death benefit rider at the start of each month by cancelling proportionate number of units from the Fund Value of the policyholder (level annual charge at the rate of Rs. 0.40 per 1000 accident benefit Sum Assured per policy year).
Salient features of the accident benefit rider are listed in the table below:
Minimum entry age 18 years Maximum entry age 55 years Maximum maturity age 60 years Minimum accident benefit sum assured Rs.10,000 Maximum accident benefit sum assured 10 times of annualized premium, subject to aggregate limit of accident benefit Sum Assured (in-built riders taken under both individual and group policies) should not exceed Rs.1 crore
Eligibility Conditions :The eligibility conditions of LIC New Endowment Policy are listed below:
|Minimum entry age||90 days|
|Maximum entry age||50 years|
|Policy term||10 to 20 years|
|Minimum maturity age||18 years|
|Maximum maturity age||60 years|
|Premium Paying Term||Same as policy term|
Investment of Funds:
Allocated premiums are utilized to buy units of the fund type opted by customers. Policyholders have the option to choose any one of the four funds listed in the table below:
|Fund Type||Investment in govt/guaranteed securities/debt||Equity Shares||Risk factor|
|Bond Fund||Not less than 60%||Nil||Low|
|Secured Fund||Not less than 45%||Not less than 15% and not more than 55%||Low to medium|
|Balanced Fund||Not less than 30%||Not less than 30% and not more than 70%||Medium|
|Growth Fund||Not less than 20%||Not less than 40% and not more than 80%||High risk|
Discontinued Policy Fund
The pattern, in terms of investment of the discontinued policy fund, is the following:
- Money market instruments: 0% to 40%
- Government securities: 60% to 100%
Charges Involved in the Plan:
Premium Allocation Charge
It is the percentage of premium allocated towards charges from the premium. The allocation rate is the part of the premium used to buy units for the policy. The allocation charges are listed in the table below:
|2nd to 5th year||5%|
|Beyond 5 years||3%|
Policy Administration charge
It is deducted at the start of each policy month by cancelling the appropriate number of units out of the Fund of a policyholder. The details of charges are listed below:
|1||0.35% * Instalment Premium* K or Rs.100, whichever is lower|
|2||0.25% * Instalment Premium* K or Rs.70, whichever is lower|
|3||2nd year charge * 1.03|
|4||3rd year charge * 1.03|
|5||4th Year charge * 1.03|
|6 and beyond||Rs. 52.17 escalating at 3% p.a. thereafter|
K is taken as given in the table below:
|Mode of premium Payment||Factor ‘K’|
Fund Management charge
The Fund Management Charge will be 0.70% p.a. of the Unit Fund for all the fund types and 0.50% p.a. of Unit Fund for ‘Discontinued Policy Fund’. This charge is levied at the time of NAV computation, which which is done on a daily basis.
This charge is levied upon switching from one fund to another. Four switches are allowed free of charge within a policy year. Any subsequent switches, will incur a charge of Rs. 100 per switch.
The ‘Date of discontinuance of the policy’ will be the date on which LIC receives intimation about discontinuance or surrender of the policy or on the expiry of the notice period of 30 days, whichever is earlier. The notice period will start from the receipt of notice by a policyholder. Details of discontinued charges are listed in the table below:
|Policy year||Charges for annualized premium up to Rs.25,000||Charges for annualized premium above Rs.25,000|
|1||Lower of 15% (AV or FV) up to a maximum of Rs.2500||Lower of 6% (AP or FV), up to a maximum of Rs.6000|
|2||Lower of 7.5% , up to a maximum of Rs.1750||Lower of 4%, up to a maximum of Rs.5000|
|3||Lower of 5%, up to a maximum of Rs.1250||Lower of 3%, up to a maximum of Rs.4000|
|4||Lower of 3%, up to a maximum of Rs.750||Lower of 2%, up to a maximum of Rs.2000|
Service Tax charges
Service tax charge will be levied as per the current tax laws and rate of service tax. Service tax will be levied on all or any of the charges applicable as issued by Government of India.
Any alterations such as change in premium payment mode, addition of the Accident Benefit Rider after policy issuance will incur a fee of Rs.50 which will be deducted by cancellation of the appropriate number of units out of the Fund of a policyholder. The deduction will be made on the date of alteration.
If premiums are not paid within the grace period, a notice will be sent to the policyholder within 15 days from the date of expiry of grace period. The policy will be considered as in force up to expiry of 30 days of the receipt of notice. Insurance cover will continue till the date of discontinuance of the policy. The benefits payable up to the expiry of 30 days will be same as under an in-force policy, except in the case of partial withdrawal.
If the policy is discontinued on or before the expiry of the 5 years’ lock-in-period, policyholder can exercise one of the following options as listed below within thirty days.
|1||Pay the due premium during the notice period|
|2||Revive the policy within two years from the date of discontinuance|
|3||Complete withdrawal without any insurance cover|
|No option selected||Pay the proceeds at the end of lock-in-period or revival period of two years, whichever is later|
If policyholder chooses option 1, he or she pays the due premium during the notice period, the policy will then be in force. If policyholder chooses option 2, the Fund Value after deducting the discontinuance charge will be converted into a monetary amount, which will then be transferred to the Discontinued Policy Fund. However, if policyholder opts for surrender within the revival period but ¾ before the expiry of 5 years’ lock-in-period, the proceeds of the Discontinued Policy Fund will be paid upon completion of 5 years.
If a policyholder opts for surrender within the revival period but ¾ after the expiry of 5 years, the proceeds will be paid immediately. If a policyholder chooses option 3, then the Fund Value after deducting the discontinuance charge will be converted into a monetary amount. The proceeds will be payable upon completion of 5 years lock-in-period. However, if a request for revival is received within 5 years’ lock-in-period or while the policy is revivable, whichever is earlier, the policy will be restored.
If the policy is discontinued after the expiry of 5 years’ lock-in- period, the policyholder can choose any of options listed below within thirty days of receipt of such notice
|1||Pay the due premiums within the notice period|
|2||Revive the policy within the revival period from the date of discontinuance or up to maturity, whichever is earlier|
|3||Complete withdrawal without any insurance cover|
|4||Convert the policy into paid-up policy|
|No option selected||Complete withdrawal without any insurance cover|
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GST of 18% is applicable on life insurance effective from the 1st of July, 2017