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What is the key to building wealth? Long-Term Investments!
Okay. So, what is one of the best asset classes for long-term investment? Long-term performance-wise, one of the best asset classes is equity!
Now, what if an insurance product combines both Life Cover and Equity Investment?
LIC New Endowment Plus plan tries to achieve this by investing in the market. Will this plan help you to build wealth in the long run? Let’s delve deep and find out the Advantages(pros) and Disadvantages(cons) of choosing LIC New Endowment Plus and whether the LIC New Endowment Plus is a Good or Bad option to park your money for building long-term wealth and as a trusted life cover.
Let’s get started!
Table of Contents
1) An Overview of LIC New Endowment Plus
2) What are the Features of LIC New Endowment Plus?
3) Who is eligible for LIC New Endowment Plus?
4) What are the Benefits of LIC New Endowment Plus? Review in Detail
5) What are the Fund options of LIC New Endowment Plus?
6) What are the Charges under LIC New Endowment Plus? Review With Illustration
7) The Grace period, Discontinued Policy and Revival of LIC New Endowment Plus – Analysis
8) Free-Look Period of LIC New Endowment Plus
9) Surrendering LIC New Endowment Plus – Analysis
10) Advantages of LIC New Endowment Plus – Analysis
11) Disadvantages of LIC New Endowment Plus – Analysis
12) Research Methodology of LIC New Endowment Plus
- Benefit Illustration – IRR (Internal Rate of Return i.e. Interest rate) Analysis of LIC New Endowment Plus
13) LIC New Endowment Plus vs Other Investment Products
- LIC New Endowment Plus Vs. Pure Term + PPF / ELSS
- LIC New Endowment Plus vs LIC New Endowment Plan (Plan no.914)
- LIC New Endowment Plus vs LIC New Money Back Policy (Plan 920)
- LIC New Endowment Plus vs Other Investment Options – Review Conclusion
14) Final Verdict on LIC New Endowment Plus – Good or Bad?
1.) An Overview of LIC New Endowment Plus
It is a Unit Linked, Non-Participating, Regular Premium, Individual Life Insurance plan which offers investment cum insurance cover during the term of the policy. This plan provides a combination of protection and long-term savings. Premiums can be invested in any one of the four categories of investment funds.
To know more about the LIC New Endowment Plus policy you can refer to the official brochure.
2.) What are the Features of LIC New Endowment Plus?
- You may pay premiums regularly at yearly, half-yearly, quarterly, or monthly.
- Premium paying terms can be chosen as per convenience.
- The premium paying term is the same as the Policy term.
- Four fund options are available.
3.) Who is eligible for LIC New Endowment Plus?
| Minimum Age at Entry | 90 days |
| Maximum Age at Entry | 50 years |
| Minimum Age at Maturity | 18 years |
| Maximum Age at Maturity | 60 years |
| Policy Term | 10 -20 years |
| Premium Paying term | Same as the policy term |
| Minimum Premium | Yearly – 20,000 Half-Yearly – 13,000 Quarterly – 8,000 Monthly – 3,000 |
| Maximum Premium | No Limits |
| Basic Sum Assured | 10 times the annualised premium |
4.) What are the Benefits of LIC New Endowment Plus? Review in Detail
Death Benefit – Analysis
On death of the life assured, an amount equal to the higher of the following shall be payable:
- Basic Sum Assured Less Partial Withdrawals, if any made during the two years immediately preceding the date of death; or
- Unit Fund Value.
- 105% of the total premiums received up to the date of death were reduced by Partial Withdrawals made during the two years immediately preceding the date of death
Where “10 times of Annualized Premium” is the equivalent of “Basic Sum Assured.”
Maturity Benefit – Analysis
On Life Assured surviving the date of maturity of LIC New Endowment Plus, an amount equal to Unit Fund Value shall be payable.
5.) What are the Fund options of LIC New Endowment Plus?
The allocated LIC New Endowment Plus premiums will be utilized to buy units as per the fund type opted by the Policyholder out of the four fund type options available. Various types of LIC New Endowment Plus fund options and their investment patterns are given in the below illustration.
| Fund Name | Government / Government Guaranteed Securities / Corporate Debt | Short-term investments such as money market instruments | Investment in Listed Equity Share | Risk Profile |
| Bond Fund | Not less than 60% | Not more than 40% | NIL | Low risk |
| Secured Fund | Not less than 45% and not more than 85% | Not more than 40% | Not less than 15% and not more than 55% | Lower to Medium risk |
| Balanced Fund | Not less than 30% and not more than 70% | Not more than 40% | Not less than 30% and not more than 70% | Medium risk |
| Growth Fund | Not less than 20% and not more than 60% | Not more than 40% | Not less than 40% and not more than 80% | High risk |
The risk profile varies for each fund. You should make sure that your risk appetite should match the fund’s risk profile.
6.) What are the Charges under LIC New Endowment Plus? Review With Illustration
Premium Allocation Charge:
This is the percentage of the LIC New Endowment Plus premium appropriated towards charges from the premium received.
| Premium | Premium Allocation Charge |
| 1st Year | 7.50% |
| 2nd to 5th Year | 5.00% |
| 6th Year and Thereafter | 3.00% |
Mortality charge:
The following rates of LIC New Endowment Plus Mortality Charge per annum per Rs. 1000 for specific age groups concerning their health are as under:
| Age | 25 | 35 | 45 | 50 |
| Rs. | 1.23 | 1.6 | 3.59 | 6.18 |
Accident Benefit Charges:
Accident Benefit Charge is the cost of Accident Benefit cover if LIC’s Linked Accidental Death Benefit Rider (if opted for).
Policy Administration Charge:
This charge shall be deducted at the beginning of each month in LIC New Endowment Plus.
| 1st Year | (0.35% *Instalment Premium * K) OR (Rs.100/-), whichever is lower |
| 2nd Year | (0.25% * Instalment Premium * K) OR (Rs.70/-), whichever is lower |
| 3rd Year | 2nd Year charge * 1.03 |
| 4th Year | 3rd Year charge * 1.03 |
| 5th Year | 4th Year charge * 1.03 |
| 6th Year and Thereafter | Rs. 52.17 in the 6th year escalating at 3% p.a. thereafter |
Where K depends on the Mode of premium
Fund Management Charge:
0.70% p.a. of Unit Fund for all the four Funds available in LIC New Endowment Plus i.e., Bond Fund, Secured Fund, Balanced Fund, and Growth Fund
0.50% p.a. of Unit Fund for “Discontinued Policy Fund”
Switching Charge:
Within a given LIC New Endowment Plus policy year 4 switches will be allowed free of charge. There will be a switching charge of Rs. 100 per switch for any additional switches made in that year.
Partial Withdrawal Charge:
This is a charge levied at the time of partial withdrawal of the fund during the contract period. A flat amount of Rs. 100/- shall be deducted.
Discontinuance Charge:
It depends on the year of discontinuance of the LIC New Endowment Plus policy and the premium amount.
Miscellaneous Charge:
A flat amount of Rs. 50 will be deducted for any alteration in the LIC New Endowment Plus policy.
Inference from Charges:
LIC New Endowment Plus levies ‘n’ number of charges as stated above. Some of the charges are essential to run the fund like the Mortality charge, and fund management charge. But other charges like Policy Administration, Switching, withdrawal, and discontinuance charges are unnecessary. When compared to other equity-related products, these charges are higher in ULIP. This will pull down your returns in the long run.
7.)The Grace period, Discontinued policy and Revival of LIC New Endowment Plus – Analysis
Grace Period:
A Grace Period of 30 days will be allowed for payment of LIC New Endowment Plus policy for yearly half-yearly or quarterly premiums and 15 days for monthly (NACH) premiums.
Discontinued policy:
If the LIC New Endowment Plus policy is discontinued during the 5 years lock-in-period: Upon expiry of the grace period, the Unit Fund Value after deducting the Discontinuance Charge shall be transferred to the Discontinued Policy Fund and the risk cover and rider cover, if any, shall cease. Discontinued Policy Fund shall be payable to you at the end of the revival period or lock-in period, whichever is later and the LIC New Endowment Plus policy shall terminate.
If the LIC New Endowment Plus policy is discontinued after the expiry of 5 years lock-in- period: Upon expiry of the grace period, in case of discontinuance of a LIC New Endowment Plus policy due to non-payment of premium, the LIC New Endowment Plus policy shall be converted into a reduced paid-up policy. The Basic Sum Assured under the policy shall be reduced to such a sum called the Paid-Up Sum Assured.
Revival of discontinued policies:
A discontinued LIC New Endowment Plus policy shall be revived within a revival period of three years from the date of the first unpaid premium or up to the date of maturity, whichever is earlier.
8.) Free-Look Period of LIC New Endowment Plus
If you are not satisfied with the “Terms and Conditions” of the LIC New Endowment Plus policy, the policy may be returned to the Corporation within 15 days (30 days in case of Online sale) from the date of receipt of the LIC New Endowment Plus policy bond.
9.) Surrendering LIC New Endowment Plus – Analysis
A LIC New Endowment Plus policy can be surrendered anytime during the policy term.
Surrender of the policy during the 5-year lock-in period: the Unit Fund Value after deducting the Discontinuance Charge shall be transferred to the Discontinued Policy Fund. The Proceeds of the Discontinued Policy Fund shall be payable at the end of the 5-year lock-in period of the LIC New Endowment Plus policy.
Surrendered after the 5 years’ lock-in period: the Unit Fund Value as at the date of surrender shall be payable. There will be no Discontinuance Charge under the LIC New Endowment Plus policy.
10.) Advantages of LIC New Endowment Plus – Analysis
- Accidental Death Benefit rider is available.
- You may withdraw the units partially at any time after the fifth policy anniversary.
- Four switches per year are free of charge.
- Using the settlement option, you can receive the Death Benefit in installments.
11.) Disadvantages of LIC New Endowment Plus – Analysis
- No Top-up shall be allowed under the plan.
- No loyalty additions or Bonus.
- The lock-in period is 5 years to surrender or partial withdrawal.
- No loan shall be allowed under this plan.
12.) Research Methodology of LIC New Endowment Plus
A long-term investor will thrive on market-linked products for wealth creation. Returns play a major role in wealth creation. Now, let us look in detail at the potential return of the LIC New Endowment Plus plan. So far, we have covered only the basic details of the LIC New Endowment Plus plan. To proceed further let us calculate the potential return of LIC New Endowment Plus. Later, this return can be compared with other investment returns.
Benefit Illustration – IRR (Internal Rate of Return i.e. Interest rate) Analysis of LIC New Endowment Plus
A 30-year-old male buys an LIC New Endowment plan for a sum assured of ₹ 3 Lakhs. The annual premium is ₹ 30,000. The policy term and the premium paying term are 20 years. On completion of 20 years, he will get the fund value.
| Male | 30 years |
| Sum Assured | 5 Lakhs |
| Policy Term | 15 |
| Premium Paying Term | 15 |
| Annualised Premium | 50,000 |
It is assumed that the Projected Investment Rate of Return that LICI will be able to earn throughout the term of the policy will be 4% p.a. or 8% p.a., as the case may be.
The Projected Investment Rate of Return is not guaranteed and there are no upper or lower limits on what you might get back as the value of your policy is dependent on several factors including future investment performance.
| Age | Year | At 4% p.a. | At 8% p.a. | ||
| Annualised premium / Maturity Benefit | Death Benefit | Annualised premium / Maturity Benefit | Death Benefit | ||
| 30 | 1 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 31 | 2 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 32 | 3 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 33 | 4 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 34 | 5 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 35 | 6 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 36 | 7 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 37 | 8 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 38 | 9 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 39 | 10 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 40 | 11 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 41 | 12 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 42 | 13 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 43 | 14 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 44 | 15 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 45 | 9,00,348 | 12,57,721 | |||
| IRR | 2.25% | 6.23% | |||
The fund value at the 4% scenario is 9 Lakhs. The IRR calculation for the 4% scenario results in 2.25%. The fund value at the 8% scenario is 12.57 Lakhs. The IRR calculation for the 8% scenario results in 6.23%.
The IRR(internal rate of return i.e. interest rate) calculation depicts that the plan doesn’t yield a better risk-adjusted return. In the long run, investing in LIC New Endowment Plus may not be beneficial to tackle inflation.
13.) LIC New Endowment Plus vs Other Investment Products
If you are looking for goal-based investment, then opting for insurance cum investment might not help you in achieving the goal. Now, let us look for other investment avenues where you might get better returns than LIC New Endowment Plus. In order to compare the returns, we need to look for an insurance cover and investment option similar to LIC New Endowment Plus.
i) LIC New Endowment Plus Vs. Pure Term + PPF / ELSS
For life cover, a pure term policy for a sum assured of ₹ 5 lakhs would cost you ₹ 2,100. The policy term and the premium paying term are 15 years. This leaves you with ₹ 47,900 for investment. Either you can go for equity-related products similar to LIC New Endowment Plus or you can opt for debt instruments.
| Pure-term Insurance policy | |
| Sum Assured | 5 Lakhs |
| Policy Term | 15 |
| Premium Paying Term | 15 |
| Annualised Premium | 2,100 |
| Investment | 47,900 |
Here, PPF is chosen to illustrate the debt investment and ELSS fund is chosen to illustrate equity investment. PPF account matures after 15 years. Capital gains tax is payable at the time of exiting the ELSS investment. Tax calculation is given below.
| Age | Year | Term Insurance + PPF | Term insurance + ELSS | ||
| Term Insurance premium + PPF | Death Benefit | Term Insurance premium + ELSS | Death Benefit | ||
| 30 | 1 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 31 | 2 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 32 | 3 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 33 | 4 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 34 | 5 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 35 | 6 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 36 | 7 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 37 | 8 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 38 | 9 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 39 | 10 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 40 | 11 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 41 | 12 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 42 | 13 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 43 | 14 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 44 | 15 | -50,000 | 5,00,000 | -50,000 | 5,00,000 |
| 45 | 12,99,115 | 18,81,834 | |||
| IRR | 6.60% | 10.84% | |||
| ELSS Tax calculation | |
| Maturity value after 15 years | 19,99,982 |
| Less | |
| Purchase price | 7,18,500 |
| Long-term capital gains | 12,81,482 |
| Exemption limit | 1,00,000 |
| Taxable LTCG | 11,81,482 |
| Tax paid on LTCG | 1,18,148 |
| Maturity value after tax | 18,81,834 |
The maturity value under PPF is 12.99 Lakhs. The IRR for Pure term insurance and PPF combo is 6.60%. Even PPF investment which is a debt instrument earns better returns than LIC New Endowment Plus. The maturity value under ELSS is 18.81 Lakhs (pre-tax value). The IRR calculation for Pure term insurance and ELSS combo results in 10.84% (post-tax return).
This comparison shows that there are better-yielding options than LIC New Endowment Plus. You get an inflation-beating return on these investments which will help you in wealth accumulation in the long run.
ii) LIC New Endowment Plus vs LIC New Endowment Plan (Plan no.914)
Let’s look at some of the features of LIC New Money Back Policy (Plan 914),
- The duration of a policy might be 12 to 35 years.
- The frequency of premium payments can be set to quarterly, monthly, half-yearly, or annual.
- Simple revisionary bonuses and supplementary bonuses are included in the maturity benefit.
To learn more about this policy and its advantages(pros) and Disadvantages(pros) you can refer to the LIC New Money Back Policy (Plan 914) review.
iiii) LIC New Endowment Plus vs LIC New Money Back Policy (Plan 920)
Let’s look at some of the features of LIC New Money Back Policy (Plan 920),
- 20 years is the fixed policy term, and 15 years is the fixed premium payment term.
- Prepayment options for premiums include quarterly, monthly, half-yearly, and annual intervals.
- Bonuses are included in the Maturity Benefit.
To learn more about this policy and its advantages(pros) and Disadvantages(pros) you can refer to the LIC New Money Back Policy (Plan 920) review.
iv) LIC New Endowment Plus vs Other Investment Options – Review Conclusion
We have compared and analysed LIC New Endowment Plus with all other alternate investment options such as Term insurance + PPF, Term Insurance + ELSS, and other LIC policies. Is mixing investment and insurance a Good or Bad idea? From what we have analysed till now, the answer is a resounding “No”. So, instead of opting for endowment plans, go for Pure Term Insurance for life cover and invest in PPF or if you require even higher returns go for ELSS.
14.) Final Verdict on LIC New Endowment Plus – Good or Bad?
LIC New Endowment Plus is an insurance plan that offers the dual benefit of investment to fulfill your long-term goals, and a life cover to financially protect your family in case of an unfortunate event.
Here, the premium paid towards the plan is divided into three parts. A part of it is contributed to your life cover, and the remaining is invested in the fund of your choice A sizeable portion is also allocated to pay agent commissions.
The IRR analysis of LIC New Endowment Plus reveals that in the long run the fund value i.e., maturity value may fall short of your required corpus. Any long-term investment should yield better returns to beat the galloping inflation. So, investing in LIC New Endowment Plus will not foster your wealth creation.
For any long-term financial goal like retirement or children’s marriage, you need a hefty corpus. This is where equity-related investments come into the picture.
If your main agenda is to create wealth in the long run, you can look at pure investment products and please avoid choosing insurance cum investment products by reading amateur reviews on social media sites like Quora, Facebook, Twitter, etc. A professional Financial planner will be the best person to assess your queries related to personal finance.
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