LIC Protection Plus Plan: Good or Bad? A Detailed ULIP Review

Q: What are the disadvantages of the LIC Protection Plus?

No loan facility: The plan does not provide any loan facility against the policy. Limited liquidity: There is no liquidity during the first five policy years, as surrender, partial withdrawal and payouts are not permitted during the lock-in period. Inadequate life cover: The Sum Assured may be insufficient to provide meaningful financial protection for your family’s long-term needs. Charges reduce investment: Various charges are deducted from the premium, meaning only the net premium is invested. This reduces the amount available for investment. Relatively low return potential: Compared with other market-linked investment options, the plan may offer relatively lower return potential, which can limit long-term wealth creation. Limited fund choices: The plan offers a restricted range of investment funds, reducing flexibility in managing your investment portfolio.

Listen to this article

Can the LIC Protection Plus Plan truly combine meaningful life protection with long-term wealth creation, or is it just another ULIP with familiar limitations?

Does the LIC Protection Plus Plan offer the right balance between insurance coverage and market-linked growth, or are there better alternatives available?

Is the LIC Protection Plus Plan a smart way to invest for long-term goals, or could its charges and structure reduce your actual returns?

This article explores the key features, benefits, costs and suitability of LIC Protection Plus, while also explaining how a ULIP works and the risks involved.

What is the LIC Protection Plus?

LIC’s Protection Plus is a Non-Par, Linked, Life, Individual, Savings plan which offers life insurance cover cum savings throughout the term of the policy.

It is a non-par product, and hence the policy is not entitled to any share in surplus (profits) during the term of the policy.

What are the features of the LIC Protection Plus?

Life insurance coverage throughout the policy term.
Choice of investment funds based on your risk appetite and investment preference.
Flexibility to select the Basic Sum Assured for the chosen annualised premium.
Option to increase or decrease the Basic Sum Assured, subject to policy terms.
Enhanced protection through LIC’s Linked Accident Benefit Rider.
Flexibility to make Top-up Premium payments to increase your investment.
Option to receive the death benefit either as a lump sum or through instalments.
Partial withdrawals permitted after completion of five years from the policy commencement date.
Refund of mortality charges if the policyholder survives until maturity.

Who is eligible for the LIC Protection Plus?

Premium Paying Term (PPT) and Policy Term	PPT (years)	Policy Term (years)
	5	10, 15, 20, and 25
	7	10, 15, 20, and 26
	10	10, 15, 20, and 27
	15	15, 20, and 28
Minimum Premium	5, 7& 10 (PPT) – ₹ 60,00015 years (PPT) – ₹ 36,000
Maximum Premium	No Limit
Minimum Age at entry	18 years (completed)
Maximum Age at entry	5 years (PPT) – 50 years7, 10, 15 years (PPT) – 65 years
Maximum Maturity Age	PPT (years)	Maximum Maturity Age
	5	75 years
	7	80 years
	10	85 years
	15	90 years
Minimum Basic Sum Assured	Age at entry less than 50 years- 7 times the annualised premiumAge at entry 50 years and above – 5 times the annualised premium

What are the benefits of the LIC Protection Plus?

1. Death Benefit

Benefits payable on death of the Life Assured before the stipulated Date of Maturity, provided the LIC Protection Plus Plan policy is in force (including during Grace Period) shall be as under: Highest of:

Basic Sum Assured reduced by Partial Withdrawals, if any, made during the two years period immediately preceding the date of death; or
Base Premium Fund Value; or
105% of the Total Base Premiums paid up to the date of death

In addition to the above, if Top-up Premium(s) have been paid under the LIC Protection Plus Plan policy, the highest of the following shall also be payable:

Total Top-up Sum Assured; or
Top-up Premium Fund Value; or
105% of the Total Top-up Premiums paid up to the date of death.

2. Maturity Benefit

On the Life Assured surviving the date of maturity, an amount equal to Unit Fund Value as on the date of maturity shall be payable.

Unit Fund Value shall be the sum of the Base Premium Fund Value and Top-up Premium Fund Value, if any.

3. Refund of Mortality Charges

The total amount of mortality charges deducted from Base Premium Fund and from Top-up Premium Fund, if any, in respect of life insurance cover shall be payable along with the maturity benefit.

What are the fund options of the LIC Protection Plus?

The LIC Protection Plus Plan policyholder shall have the option to choose any one of the following six funds to invest premiums initially and at the time of switching.

Each premium paid, including Top-up Premium, after deduction of Premium Allocation Charge, shall be utilised to purchase units of the Fund type chosen.

		Asset Class
S.no	Fund Name	Govt Securities / Corporate Bond	Money Market Instruments	Listed Equity Shares	Risk Profile
1	Bond Fund	Not less than 60%	Not more than 40%	Nil	Low Risk
2	Secured Fund	Not less than 45% & Not more than 85%	Not more than 40%	Not less than 15% & Not more than 55%	Low to Medium
3	Balanced Fund	Not less than 30% & Not more than 70%	Not more than 40%	Not less than 30% & Not more than 70%	Medium
4	Growth Fund	Not less than 20% & Not more than 60%	Not more than 40%	Not less than 40% & Not more than 80%	High Risk
5	Flexi Growth Fund	0-20%	0-40%	40-100%	Very High Risk
6	Flexi Smart Growth Fund	0-20%	0-40%	40-100%	Very High Risk
	Discontinued Policy Fund	60-100%	0-40%	–	–

What are the charges of the LIC Protection Plus?

A. Premium Allocation Charge

This is the percentage of the premium appropriated towards charges from the premium received, including Top-up premium, if any.

Policy year	Offline sale / Online sale
1st year	8% / 3%
2nd to 5th year	5.5% / 2%
Thereafter	4% / 1.5%

B. Mortality Charge

Mortality Charge is the cost of life insurance cover which is age specific, and this will be taken at the beginning of each policy month by cancelling appropriate units out of the Unit Fund.

The monthly charge will be one twelfth of the annual Mortality Charges.

C. Accident Benefit Charges (if LIC’s Linked Accidental Death Benefit Rider is opted for)

Accident Benefit Charge is the cost of LIC’s Linked Accidental Death Benefit Rider if opted for.

This charge will be taken at the beginning of each policy month by cancelling the appropriate number of units from the Base Premium Fund while the LIC Protection Plus Plan policy is in force (i.e., all due premiums have been paid) and shall be at the rate of Rs. 0.40 per thousand of Accident Benefit Sum Assured per policy year.

D. Fund Management Charge

0.35% p.a. of Unit Fund for all the 6 Fund types available, i.e. Bond Fund, Secured Fund, Balanced Fund, Growth Fund, Flexi Growth Fund and Flexi Smart Growth Fund.

0.50% p.a. of Unit Fund for Discontinued Policy Fund.

E. Policy Administration Charge

Policy charge	Policy Administration Charge
First 5 Years	NIL
Year 6	Annualised Premium less than ₹ 60,000: ₹ 85 per monthAnnualised Premium equal to greater than ₹ 60,000: ₹100 per month
Thereafter from 7th year onwards	Applicable Policy Administration Charges in 6th year escalating at the rate of 5% p.a.

F. Switching Charge

Within a given policy year, 4 switches shall be allowed free of charge.

Subsequent switches in that year shall be subject to a Switching Charge of ₹ 100 per switch.

G. Partial Withdrawal Charge

A flat amount of ₹ 100 shall be deducted by cancelling the appropriate number of units out of the Base Premium Fund on the date on which partial withdrawal takes place.

H. Discontinuance Charge

It depends on the year of discontinuance and the premium amount.

There is no discontinuance charge from the 5^th policy year onwards.

I. Miscellaneous Charge

This is a charge levied for an alteration during the contract, such as change in premium mode, Increase/Decrease in Basic Sum Assured and grant of Accident Benefit Rider after the issue of the policy, and shall be a flat amount of ₹ 100, which will be deducted by cancelling the appropriate number of units

Inference from the charges: Unlike most conventional investments, where you can generally exit or withdraw without specific discontinuance charges, LIC Protection Plus imposes charges for both discontinuance and partial withdrawals.

The plan also levies charges for fund switching and premium allocation. As a result, the entire premium paid is not invested.

Various charges are deducted upfront, and only the net premium is allocated to the investment fund.

Over the long term, these charges can reduce the amount available for investment and, consequently, impact the overall returns.

Grace Period, Discontinuance and Revival of the LIC Protection Plus

Grace Period

Grace Period: A grace period of 30 days will be allowed for payment of yearly or half-yearly, or quarterly premiums and 15 days for monthly (NACH) premiums from the date of first unpaid premium.

Discontinuance

If the policy is discontinued during the 5 years’ lock-in period: the Base Premium Fund Value after deducting the applicable Discontinuance Charge in respect of Base Premium along with the Top-up Premium Fund Value, if any, shall be transferred to the Discontinued Policy Fund and the risk cover and rider cover, if any, shall cease. There shall be no discontinuance charge in respect of Top-up Premium Fund Value. Only Fund Management Charges shall be deducted from the Discontinued Policy Fund. The proceeds of the Discontinued Policy Fund in respect of the policy shall be payable at the end of the revival period or lock-in period, whichever is later, and the policy shall terminate.

If the policy is discontinued after 5 years’ lock-in period: the policy shall be converted into a reduced paid-up policy. The Basic Sum Assured shall be reduced to such a sum called Paid-Up Sum Assured and shall be equal to Basic Sum Assured multiplied by the ratio of‘total period for which premiums have already been paid’ to the ‘maximum period for which premiums were originally payable’. The policy shall continue to be in reduced paid-up status without rider cover, if any, i.e. no Accident Benefit cover shall be available under a reduced paid-up policy.

Revival

The LIC Protection Plus Plan policyholder can revive the policy during the Revival Period.

Free Look Period for the LIC Protection Plus

If the policyholder is not satisfied with the “Terms and Conditions” of the policy, the LIC Protection Plus Plan policy may be returned within a period of 30 days from the date of receipt of the electronic or physical mode of Policy Document, whichever is earlier.

Surrendering the LIC Protection Plus

If the policy is surrendered during the 5 years lock-in period: the Base Premium Fund Value after deducting the applicable Discontinuance Charge in respect of Base Premium along with the Top-up Premium Fund Value, if any, shall be transferred to the Discontinued Policy Fund. The policy shall continue to be invested in the Discontinued Policy Fund till the end of the lock-in period. Only Fund Management Charge (FMC) as specified in Para 9.D shall be deducted from this fund, and no risk cover (including rider cover, if any) shall be available on such policy during this period.

If the policy is Surrendered after the 5 years’ lock-in period: the Unit Fund Value as on the date of intimation of surrender shall be payable to the policyholder and the LIC Protection Plus Plan policy shall terminate.

What are the advantages of the LIC Protection Plus?

Riders for enhanced protection: Additional riders can be opted for to strengthen the insurance coverage.
Partial withdrawal facility: Units can be partially withdrawn after completion of the five-year lock-in period.
Top-up Premium option: Policyholders can pay additional top-up premiums to increase their investment.
Flexibility in Basic Sum Assured: The Basic Sum Assured can be increased or decreased, subject to the policy terms.
Fund-switching facility: Policyholders can switch between different investment fund options based on their investment needs and risk appetite.
Settlement Option: The Death Benefit can be received in instalments instead of as a lump-sum payment.

What are the disadvantages of the LIC Protection Plus?

No loan facility: The plan does not provide any loan facility against the policy.
Limited liquidity: There is no liquidity during the first five policy years, as surrender, partial withdrawal and payouts are not permitted during the lock-in period.
Inadequate life cover: The Sum Assured may be insufficient to provide meaningful financial protection for your family’s long-term needs.
Charges reduce investment: Various charges are deducted from the premium, meaning only the net premium is invested. This reduces the amount available for investment.
Relatively low return potential: Compared with other market-linked investment options, the plan may offer relatively lower return potential, which can limit long-term wealth creation.
Limited fund choices: The plan offers a restricted range of investment funds, reducing flexibility in managing your investment portfolio.

Research Methodology of LIC Protection Plus

Evaluating the potential returns is essential when determining whether a product fits your investment portfolio.

Let’s examine the Internal Rate of Return (IRR) of LIC Protection Plus using an illustration from the policy brochure.

Benefit Illustration – IRR Analysis of LIC Protection Plus

A 35-year-old male opts for LIC Protection Plus with a Sum Assured of ₹4 lakh, a policy term of 20 years and a premium-paying term of 15 years. The annualised premium is ₹40,000.

Male	35 years
Sum Assured	₹ 4,00,000
Policy Term	20 years
Premium Paying Term	15 years
Annualised Premium	₹ 40,000

As the plan is positioned as a wealth-creation product, the maturity benefit is payable at the end of the 20-year policy term.

The brochure illustrates projected returns at 4% and 8% per annum. These rates are only illustrative and are neither guaranteed nor indicative of the actual returns that the policy may generate.

		At 4% p.a.		At 8% p.a.
Age	Year	Annualised premium / Maturity benefit	Death benefit	Annualised premium / Maturity benefit	Death benefit
35	1	-40,000	4,00,000	-40,000	4,00,000
36	2	-40,000	4,00,000	-40,000	4,00,000
37	3	-40,000	4,00,000	-40,000	4,00,000
38	4	-40,000	4,00,000	-40,000	4,00,000
39	5	-40,000	4,00,000	-40,000	4,00,000
40	6	-40,000	4,00,000	-40,000	4,00,000
41	7	-40,000	4,00,000	-40,000	4,00,000
42	8	-40,000	4,00,000	-40,000	4,00,000
43	9	-40,000	4,00,000	-40,000	4,00,000
44	10	-40,000	4,00,000	-40,000	4,00,000
45	11	-40,000	4,00,000	-40,000	4,00,000
46	12	-40,000	4,00,000	-40,000	4,00,000
47	13	-40,000	4,00,000	-40,000	4,00,000
48	14	-40,000	4,00,000	-40,000	4,00,000
49	15	-40,000	4,00,000	-40,000	4,00,000
50	16	0	4,00,000	0	4,00,000
51	17	0	4,00,000	0	4,00,000
52	18	0	4,00,000	0	4,00,000
53	19	0	4,00,000	0	4,00,000
54	20	0	4,00,000	0	4,00,000
55		7,81,306		13,20,333

	IRR	2.02%		6.00%

The projected outcomes are:

At 4% assumed return: Fund Value of ₹7.81 lakh; IRR of 2.02% as per the LIC Protection Plus Plan maturity calculator
At 8% assumed return: Fund Value of ₹13.20 lakh; IRR of 6.00% as per the LIC Protection Plus Plan maturity calculator

The projected IRRs are relatively modest, particularly considering the long investment horizon.

Compared with other equity-oriented investment options, the return potential may be less attractive for investors seeking aggressive long-term wealth creation.

Therefore, LIC Protection Plus may not be the most suitable choice for investors whose primary objective is to build substantial wealth through equity exposure.

LIC Protection Plus Vs. Other Investments

Investing in a low-return market-linked insurance product may not be the most efficient way to build long-term wealth.

A better approach is to separate insurance from investment—use a pure-term plan for life cover and invest the remaining amount in an instrument suited to your risk appetite and financial goals.

LIC Protection Plus Vs. Pure-term + PPF/Equity Mutual Fund

Let’s compare this approach with LIC Protection Plus using the same assumptions from the earlier illustration.

The Basic Sum Assured in the earlier illustration is ₹4 lakh, which is below the ₹5 lakh minimum sum assured prescribed by IRDAI.

Therefore, we consider a pure-term insurance policy with a Sum Assured of ₹5 lakh.

A 20-year pure-term policy with a 10-year premium-paying term costs approximately ₹4,600 per year. In comparison, LIC Protection Plus requires an annual premium of ₹40,000.

This leaves a difference of ₹35,400 per year, which can be invested separately. Further, since the term insurance premium is payable for only 10 years, the entire ₹40,000 can be invested during the remaining five years.

Pure Term Life Insurance Policy
Sum Assured	₹ 5,00,000
Policy Term	20 years
Premium Paying Term	10 years
Annualised Premium	₹ 4,600
Investment	₹ 35,400

For this illustration, the surplus amount is assumed to be invested either in a PPF account (debt) or an Equity Mutual Fund (equity).

		Term Insurance + PPF		Term insurance + Equity Mutual Fund
Age	Year	Term Insurance premium + PPF	Death benefit	Term Insurance premium + Equity Mutual Fund	Death benefit
35	1	-40,000	5,00,000	-40,000	5,00,000
36	2	-40,000	5,00,000	-40,000	5,00,000
37	3	-40,000	5,00,000	-40,000	5,00,000
38	4	-40,000	5,00,000	-40,000	5,00,000
39	5	-40,000	5,00,000	-40,000	5,00,000
40	6	-40,000	5,00,000	-40,000	5,00,000
41	7	-40,000	5,00,000	-40,000	5,00,000
42	8	-40,000	5,00,000	-40,000	5,00,000
43	9	-40,000	5,00,000	-40,000	5,00,000
44	10	-40,000	5,00,000	-40,000	5,00,000
45	11	-40,000	5,00,000	-40,000	5,00,000
46	12	-40,000	5,00,000	-40,000	5,00,000
47	13	-40,000	5,00,000	-40,000	5,00,000
48	14	-40,000	5,00,000	-40,000	5,00,000
49	15	-40,000	5,00,000	-40,000	5,00,000
50	16	0	5,00,000	0	5,00,000
51	17	0	5,00,000	0	5,00,000
52	18	0	5,00,000	0	5,00,000
53	19	0	5,00,000	0	5,00,000
54	20	0	5,00,000	0	5,00,000
55		13,92,893		24,14,596

	IRR	6.40%		10.52%

Alternative 1: Term Insurance + PPF

The investment grows to approximately ₹13.92 lakh at maturity, generating an IRR of 6.40%.

Alternative 2: Term Insurance + Equity Mutual Fund

The investment grows to approximately ₹26.62 lakh before tax. After accounting for capital gains tax, the post-tax value is approximately ₹24.14 lakh, translating to a post-tax IRR of 10.52%.

Equity Mutual Fund Tax Calculation
Maturity value after 20 years	26,62,539
Purchase price	5,54,000
Long-Term Capital Gains	21,08,539
Exemption limit	1,25,000
Taxable LTCG	19,83,539
Tax paid on LTCG	2,47,942
Maturity value after tax	24,14,596

Both alternatives offer better return potential than the LIC Protection Plus illustration and have the potential to outpace inflation over the long term.

More importantly, separating insurance from investment allows you to choose the appropriate level of life cover and invest the surplus according to your risk profile and financial goals.

The key takeaway: LIC Protection Plus combines insurance and investment, but its relatively low return potential may limit wealth creation. A combination of adequate term insurance + goal-oriented investments can be a more efficient strategy for long-term wealth accumulation.

Final Verdict on LIC Protection Plus

LIC Protection Plus is a market-linked insurance product that combines life cover with investment.

You pay premiums during the policy term, while the accumulated fund value is payable at maturity.

However, the plan offers limited fund choices, and a closer evaluation suggests that it may not deliver adequate value either as an insurance product or as an investment.

The projected returns indicate relatively low return potential, while the Sum Assured may be insufficient to provide meaningful financial protection for your family.

The impact of various charges further reduces the amount available for investment and can significantly affect long-term returns compared with other equity-oriented investment options.

As a result, LIC Protection Plus may not be the most effective choice for achieving long-term financial goals and it also has a high agent commission.

A more efficient approach is to separate insurance from investment. Consider purchasing an adequate pure-term life insurance policy for financial protection and investing separately in products that align with your goals, risk appetite and investment horizon.

This approach can provide greater flexibility, liquidity and potentially better wealth-creation opportunities than combining the two through a ULIP.

Do Quora, Facebook, and Twitter have the final say when it comes to financial advice?

For a personalised strategy, consider consulting a Certified Financial Planner (CFP) who can assess your financial goals, risk profile and investment horizon and help structure an appropriate financial plan.

LIC Protection Plus Plan: Good or Bad? A Detailed ULIP Review

Table of Contents:

What is the LIC Protection Plus?

What are the features of the LIC Protection Plus?

Who is eligible for the LIC Protection Plus?