Is LIC Nivesh Plus Plan a good investment product considering your Financial Goals?
Will LIC Nivesh Plus help you in wealth creation in the long run?
Market-linked products typically invest in a diversified portfolio of assets, which may include equities, fixed income, or other investments.
The growth potential depends on the performance of these underlying assets.
In this article, let us do a detailed analysis and review the specific features, advantages (pros), and disadvantages (cons) along with the potential returns of the plan.
With this research analysis, you can make an informed decision regarding wealth creation.
Table of Contents
- Death Benefit of LI C Nivesh Plus
- Maturity Benefit: of LIC Nivesh Plus
5.)What are the Fund options under LIC Nivesh Plus?
6.)Various Charges under LIC Nivesh Plus
7.)Free-Look Period in LIC Nivesh Plus
8.)How to Surrender LIC Nivesh Plus
9.)Advantages of LIC Nivesh Plus
10.)Disadvantages of LIC Nivesh Plus
11.)LIC Nivesh Plus Plan Research Methodology
- LIC Nivesh Plus Plan Benefit Illustration – IRR Analysis
- i) LIC Nivesh Plus Vs. Pure Term Life Insurance + ELSS
- ii) LIC Nivesh Plus Plan VS LIC Bima Jyoti Plan.
- iii) LIC Nivesh Plus Plan VS LIC SARAL Pension Plan.
1. What is LIC Nivesh Plus Policy?
This policy is a Unit Linked, Non-Participating, Single Premium Individual Life Insurance plan. You have a choice of investing the premium in one of the four types of investment funds available.
The Unit Fund is subject to various charges and values of units might increase or decrease, depending on Net Asset Value (NAV).
2. What are the Features of LIC Nivesh Plus?
- There are two variants available under this plan.
- Option 1 – 1.25 times the single premium.
- Option 2 – 10 times the single premium.
- Four fund options are available.
- Guaranteed additions offered after a specific duration enhance the fund value.
3. Who is Eligible to invest in LIC Nivesh Plus?
|Option 1||Option 2|
|Basic Sum Assured||1.25 times the single premium||10 times the single premium|
|Minimum Age at Entry||90 days|
|Maximum Age at Entry||70 years||35 years|
|Minimum Age at Maturity||18 years|
|Maximum Age at Maturity||85 years||50 years|
|Policy Term||10-25 years||For age at entry up to 25 yrs. – 10 -25 For age at entry 26 to 30 yrs. – 10 -29For age at entry 31 to 35 yrs. – 10|
|Premium Paying Mode||Single Premium only|
|Minimum Premium||Rs. 1,00,000|
|Maximum Premium||No Limits|
4. What are the Benefits of LIC Nivesh Plus?
Death Benefit of LIC Nivesh Plus Plan
On death of the life assured, death benefit will be higher of the following :
- Basic Sum Assured Less Partial Withdrawals, if any made during the first two years period preceding the date of death; or
- Unit Fund Value.
Maturity Benefit of LIC Nivesh Plus Plan
If the policyholder survives till the date of maturity, an amount equal to Unit Fund Value shall be payable.
5. What are the Fund options under LIC Nivesh Plus?
The allocated premiums will be utilized to buy units from the chosen fund by the Policyholder out of four fund options available. The four Fund options are Bond Fund, Secured Fund, Balanced Fund, and Growth Fund.
The following table depicts the various types of fund options and their Investment patterns.
|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 fund risk profile should match your risk appetite.
6. Various Charges under LIC Nivesh Plus Plan
Premium Allocation Charge:
The percentage of allocated premium is being charged as Premium Allocation Charge.
For Off-line sale – 3.30%
For On-line Sale – 1.50%
The rate of Mortality Charge depends on the age of the life assured starting from a thousand Rupees:
Accident Benefit Charges:
If the benefit rider has been opted then the Accident Benefit Charge will be the cost of Accident Benefit cover.
Fund Management Charge:
1.35% p.a. of Unit Fund will be charged for all the four Funds available i.e., Bond Fund, Secured Fund, Balanced Fund, and Growth Fund
It is 0.50% p.a. of Unit Fund for “Discontinued Policy Fund”
Only 4 free switches are available within a policy year. Any subsequent switches within that year shall be subject to a Switching Charge of Rs. 100 per switch.
Partial Withdrawal Charge:
This charge is levied at the time of partial withdrawal of the fund during the contract period. A flat amount of Rs. 100/- shall be deducted.
It depends on the year of discontinuance and the premium amount.
A flat amount of Rs. 100 will be deducted for any alteration.
Inference these charges: The above charges are part and parcel of the LIC Nivesh Plus plan. In general, other market-linked products don’t levy these types of charges under different heads.
In other market-linked products, other than expense ratio they don’t levy any charges and their investment process is very transparent. So the charges for switching, partial withdrawal, and discontinuance are a burden to an investor.
7. Free-Look Period in LIC Nivesh Plus
If you are not satisfied with the “Terms and Conditions” of the policy, the policy may be returned to the Corporation within 15 days (30 days in case of Online) starting from the date of receipt of the policy bond.
For more details, you can refer to LIC Nivesh Plus Plan Policy Brochure
8. How to Surrender LIC Nivesh Plus?
This LIC Nivesh Plus Plan can be surrendered anytime during the policy term.
Surrendering LIC Nivesh Plus 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 5 years lock-in-period.
Surrendering LIC Nivesh Plus after the 5 year lock-in-period:
The Unit Fund Value as of the date of surrender shall be payable. No Discontinuance Charge under the policy.
9. Advantages of LIC Nivesh Plus
- Guaranteed Additions as a percentage of a Single Premium shall be added to the Unit Fund on completion of a specific duration of policy years.
- Accidental death benefit rider is available.
- You can partially withdraw the units at any time after the fifth policy anniversary.
- Four free switches are available within a policy year.
- Using the settlement option, you can receive the Death Benefit in installments.
10. Disadvantages of LIC Nivesh Plus
- No Top-up shall be allowed under the plan.
- The lock-in period is 5 years.
- No loan shall be allowed under this plan.
11. LIC Nivesh Plus Research Methodology
It is crucial to carefully assess the product’s performance before investing. Market-linked products provide exposure to the financial market, but their potential returns might vary.
Let us now calculate the potential return of LIC Nivesh Plus. Following is the benefit illustration taken from the sale brochure of LIC Nivesh Plus.
LIC Nivesh Plus Benefit Illustration – IRR Analysis
Mr. A who is 30 years old purchases LIC’s Nivesh Plus for Rs 1,00,000/- for a policy term of 20 years. He chooses plan option 2 (10 times the single premium). At the end of 20 years, he receives the fund value.
It is assumed that the Projected Investment Rate of Return that LIC will be able to earn throughout the policy term will be 4% p.a. or 8% p.a.
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. As it depends on various factors including future investment performance.
|Policy Term||20 years|
|Sum Assured||10 Lakhs|
|Single premium||1 Lakh|
|At 4% p.a.||At 8% p.a.|
|Age||Year||Annualised premium / Maturity benefit||Death benefit||Annualised premium / Maturity benefit||Death benefit|
The fund value assumed at a gross return of 4% is 1.08 Lakhs. The fund value assumed at a gross return of 8% return is 2.67 Lakhs.
Under a gross return of 4%, the net return shall be 0.80%. And under the gross return of 8%, the net return shall be 5.32%.
Even if you invest your lump sum in a bank fixed deposit at an average interest rate of 6%, the amount doubles in 12 years (Rule of 72). The return from LIC Nivesh Plus is lower than any debt instrument return.
The risk and return are not proportionate. For wealth creation in the long run, you need a better risk-adjusted return. So, investing in LIC Nivesh Plus will not generate substantial returns in the long run.
12. LIC Nivesh Plus VS Other Investments
Investing in ULIPs offers an opportunity to invest in the market. At the same time, you get tax benefits for the amount invested. Now, let us look for alternate investments where you get an opportunity to invest in the market as well as tax advantage. Apart from that, we need to look for life cover.
Equity Linked Saving Scheme (ELSS) is a mutual fund scheme that is a market-linked product offering tax benefits. For life cover, let us take a Pure Term Life Insurance Policy.
i) LIC Nivesh Plus Vs. Pure Term Life Insurance + ELSS
A pure term policy for a sum assured of ₹ 10 lakhs would cost ₹ 44,500 (Single premium). The Policy term is 20 years. Out of ₹ 1 Lakh, the balance ₹ 55,500 is invested in ELSS fund.
|Pure Term Life Insurance Policy|
|Policy Term||20 years|
|Sum Assured||10 Lakhs|
At the end of 20 years, while exiting the ELSS fund, capital gains tax arises. Let us set aside the tax payable from the maturity proceeds. The tax calculation is given below.
|Age||Year||Term Insurance premium + ELSS||Death benefit|
|ELSS Tax Calculation|
|Maturity value after 20 years||5,35,369|
|Long-term capital gains||4,79,869|
|Tax paid on LTCG||37,987|
|Maturity value after tax||4,97,382|
The post-tax fund value is 4.97 Lakhs. The IRR for this cash flow is 8.81%. In this alternate arrangement, you get life cover, participation in the market, and tax benefits.
Also, the return from this alternate investment is more than the inflation rate. That means, that with the accumulated fund value, you can easily meet the inflated cost of your goals. Under the LIC Nivesh Plus Plan, you may fall short of your goals.
Please make a note of one more important point, in the Budget 2021 the government announced that proceeds from ULIP shall be taxable if the annual premium exceeds ₹ 2.5 Lakh in any year of the term of the policy.
ii) LIC Nivesh Plus Plan VS LIC Bima Jyoti Plan.
Let us understand the different features available under the LIC Bima Jyoti Plan.
- Flexibility to choose the Premium payment method between, yearly, half-yearly, quarterly, or monthly basis under LIC Bima Jyoti.
- If you pay the premium without default, you will enjoy the advantages as promised.
- Five additional riders help you improve your life insurance.
If you wish to do further analysis you can refer to the article on LIC Bima Jyoti Review – Should You Buy?
iii) LIC Nivesh Plus Plan VS LIC SARAL Pension Plan.
Here are some key features under the LIC Saral Pension Plan.
- There are two annuity options available in the LIC Saral Pension Plan.
- It provides a lifelong annuity.
- Return of 100% of Purchase Price.
For further analysis and detailed review you can read the article on LIC Saral Pension Review– Should You Buy?
13. Final Verdict on LIC Nivesh Plus – Is it Good or Bad?
Certainly, investing in market-linked products helps you in the wealth creation process when compared to fixed instruments. LIC Nivesh Plus has four different fund options catering to your risk appetite. It also offers the flexibility to invest either in equity or debt funds depending upon your risk appetite.
Investors who are ready to take risks should analyse the alpha generated by the product. Better risk-adjusted return is essential for wealth creation in the long run which is missing in LIC Nivesh Plus.
The major reason for poor returns is mainly due to charges under this plan. Charges under the plan include charges for switching, withdrawal and surrender, etc. You may not find these charges in any other market-linked product.
These charges along with High Agent Commission pull down your overall return of the policy.
It’s essential for you to align your investment choice with your risk tolerance, investment goals, and time horizon. So that you can make informed decisions regarding wealth creation.
Don’t refer to social media sites such as Quora, Facebook, Twitter, etc. for taking insurance or investment. Consulting a Financial Advisor will be beneficial for you in choosing the right market-linked product for your needs.