LIC Protection Plus
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?
What are the features of the LIC Protection Plus?
Who is eligible for the LIC Protection Plus?
What are the benefits of the LIC Protection Plus?
What are the fund options of the LIC Protection Plus?
What are the charges of the LIC Protection Plus?
Grace Period, Discontinuance and Revival of the LIC Protection Plus
Free Look Period for the LIC Protection Plus
Surrendering the LIC Protection Plus
What are the advantages of the LIC Protection Plus?
What are the disadvantages of the LIC Protection Plus?
Research Methodology of LIC Protection Plus
Benefit Illustration – IRR Analysis of LIC Protection Plus
LIC Protection Plus Vs. Other Investments
LIC Protection Plus Vs. Pure-term + PPF/Equity Mutual Fund
Final Verdict on 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.
| 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 | |
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:
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:
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.
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.
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% | – | – | |
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 5th 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
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.
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.
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.
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.
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:
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.
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.
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.
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.
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