Unit Linked Insurance Plans (ULIPs) have always been popular among people. They have some attention-grabbing features such as:
- They combine the advantages of investment and insurance in a single plan.
- The benefit of Life Cover.
As a result, your money is expected to grow, plus the future of your loved ones will remain protected from the unexpected turns of life.
With time, there have been significant improvements in ULIPs. Each new ULIP is coming up with innovative features and benefits.
In this article, we will review the ICICI Prudential Signature Plan. Read on and find out whether it holds any major benefit for you or not!
Table of Content:
1. Advantages of ICICI Pru Signature Plan
2.Disadvantages of ICICI Pru Signature Plan
3.ICICI Pru Signature Plan Review: Plan Options
4. ICICI Prudential Signature: Special Features and Benefits
5.ICICI Pru Signature Plan Funds & Performance
6.Charges under The ICICI Prudential Signature Plan
- Premium allocation charge
- Fund management charge
- Policy administration charge
- Mortality charges
- Discontinuance charges
6.Review and Analysis of Premium Allocation Charges of ICICI Prudential Signature Plan
7. Analysis and Review of ICICI Prudential Signature Plan
8.Returns of ULIP as Compared to Mutual Funds
9.How to Surrender Your ICICI Pru Signature plan?
ADVANTAGES of: ICICI Pru Signature Plan:
1. Control over your Investment:
You will have control of your invested money in the ways given below
- Fund Switch: With this option, it is possible to move your money between equity, balanced, and debt funds
- Premium Redirection: With this option, it is possible to invest your future premium in a different fund of your choice.
- Partial Withdrawal: It is an option where you can withdraw a part of your money but it comes with certain restrictions with different ULIPs.
2.Significant Tax Benefits:
Let us review what are the tax benefits offered by ICICI Prudential Signature Plan.
- Investments in ULIPs up to ₹1.5 Lacs per annum are Tax-Free u/s 80C of the Income Tax Act.
- The death benefit is also exempt from tax, under section 10(10D) of the income tax act.
- However, the maturity proceeds are taxable under conditions mentioned in the Finance Act 2021.
- Also, it does not attract any tax while fund switching.
ICICI Prudential Signature Plan consists of all the tax benefits, listed above.
3. More benefits in long term investments:
Depending on the policy you choose, it will have its specific rewards and bonuses, such as; wealth boosters, loyalty additions, etc.
Disadvantages of ICICI Pru Signature Plan
- The biggest disadvantage of ULIP is that the returns are not guaranteed. For example, if you have chosen a ULIP that invests a large portion of money in equity stocks, and if the shares are not doing well, then the chances of losing money are inevitable.
- Returns are poor because there are multiple charges in this scheme, such as mortality charges, annual maintenance charges, administration charges, etc. These charges bring down the returns significantly. In the first year itself, as high as 5% of the premium was lost in paying these charges.
- A Lock-in period of 5 years, it makes the investor difficult to come out of the policy. Moreover, the policy also levies a discontinuance charge on the fund value. Under The Finance Act 2021, the maturity proceeding of ULIPs is taxable as capital gains if the Annual Premium in any year is more than ₹2.5 lakhs.
ICICI Prudential Signature Plan Review: Plan Options
ICICI Prudential Signature scheme comes with 3 plans for investment. Let’s review what are all the benefits you will receive with the plan of your choice:
1. ICICI Prudential Signature scheme: Advantage Plan
- Annualized Premium: Min: Rs. 2,00,000 and Max: Rs. 4,99,999
- Benefits: Return of all Premium Allocation Charges + Wealth Boosters (described in the next section)
2. ICICI Prudential Signature scheme: Premier Plan
- Annualized Premium: Min: Rs. 5,00,000 and Max: Rs. 9,99,999
- Benefits: Return of all Premium Allocation Charges + Wealth Boosters + Value Benefit in year 2.
Now, let’s know more about these benefits:
Let’s understand each benefit of these options:
➢ i.) Wealth Boosters:
It is added to enhance wealth creation by allocating extra units to your policy at the end of every 5th policy year.
However, it starts only from the end of the 10th policy year till the end of your policy term. As given in the description below, based on your term of Premium Payment.
➢ ii.) Return on Premium Allocation Charges:
The total of Premium Allocation Charges will be added to the Fund Value at the end of the 10th policy year.
The same amount will be added again at the end of every 5th policy year thereafter !
➢ iii.) Value benefit
5% of your annual premium will be added to your fund value as the extra units based on the conditions mentioned below for different plan options.
Mr. Shroff is 35 years old and invested in ICICI Pru Signature Premium Plan, with the below details:
- Policy term: 30 years
- Premium to be invested: Rs. 5 Lacs per annum
- Premium payment term: 7 years
Now, soon after the 2nd year, Mr. Shroff will get the ‘value benefit’ of Rs. 25,000, that will be added to his policy fund value.
At the end of 10 years, Mr. Shroff will get the Total Premium Allocation Charge of Rs. 1,75,000, which will further get added to his policy fund value.
3. ICICI Prudential Signature scheme: Exclusive Plan
- Annualized Premium: Amount: Rs. 10,00,000 and more.
- Benefits: Return of all premium allocation charges + Wealth Boosters + Value Benefit in year 2 + Value Benefit in year 6
The Exclusive Plan has all the benefits of the Premium Plan, as described above. In addition, it provides the value benefit in 6th year. Let’s take an example:
If Mr. Shroff in the previous example chooses to invest the premium of Rs. 10 Lacs per annum in an exclusive plan, with the policy term of 30 years and premium payment term of 7 years.
Then after the payment of the 2nd and 6th-year premium, Mr. Shroff will get Rs. 50,000 added to his fund value.
At the end of 10 years, he will get back the Total Premium Allocation Charge of Rs. 3,50,000 added to his policy fund value.
The same amount gets added every 5 years until the end of the policy term.
ICICI Prudential Signature Plan: Features and Benefits
1. Premium Payment Options:
For the whole life plan, the premium payment option is through Limited pay at 7th, 10th, and 15th years.
Minimum Premium Amount: Rs. 2,00,000 p.a.
Maximum Premium Amount: Unlimited
Premium Payment Modes: Single, yearly, half-yearly and monthly
2. Life Cover
It is applicable for the entire policy term, to provide security to your family even in your absence.
In case of the unfortunate death of any policy-holder during the term of the policy, the nominee will receive the Death Benefits. Death Benefit would be the highest among:
- Sum Assured
- Fund Value, or
- Minimum Death Benefit 105% of the total premiums paid
3. Systematic Withdrawal Plan and Partial Withdrawal Benefits
This facility allows you to withdraw a pre-determined percentage of your fund value regularly, under the conditions, given below:
- Systematic Withdrawal Plan is allowed only after the first five policy years.
- The payouts may be taken monthly, quarterly, half-yearly or yearly, on the 1st or 15th date of a month.
- This facility can be opted at policy inception or anytime during the policy term. You may modify or output out of the facility by notifying your branch manager.
- The maximum amount of withdrawals in a year should not exceed 20% of the Fund Value.
Systematic Withdrawal Plan can be used simultaneously with Partial Withdrawal benefits, which is designed to help you provide liquidity so that any immediate financial need can be met.
Partial Withdrawal can be availed after the completion of 5 policy years, provided that the money is not in the Discontinued Policy(DP) Fund.
With partial withdrawal benefits, you can make an unlimited number of Partial Withdrawals and they are free of cost.
4. Whole Life Policy Term
For the Whole Life policy term option, the policy term will be equal to 99 minus Age at entry.
For example, if you take this policy when you are 64 years old, then the policy term will be 99-64=35 years.
The maximum age of entry in this policy is 65 years under Limited and Regular Pay. And, 70 years under Single Pay.
The maturity age of the whole life policy term is 99 Years.
An assured sum of whole life policy is defined in the next section.
5. Sum Assured in ICICI Prudential Signature Plan:
Single Pay Option:
- Limited and Regular Pay Option:
Minimum Sum Assured: 7x Annual Premium.
Maximum Sum Assured:
- Limited & Regular Pay: Whole Life Option:
The plan option and the additional benefits discussed here are only for the ICICI Pru Signature Plan Offline purchase policy.
ICICI Pru also offers the same Signature Plan Online with slightly modified policy features. You can check it out here: ICICI Pru Signature Plan Online Brochure PDF.
Other than these minor differences, both of the ICICI Pru Signature Plan policies are the same.
Let’s take a look at the review of the performance of the funds under the ICICI Pru Signature Plan.
ICICI Pru Signature Plan Funds & Performance:
Since ICICI Pru Signature Plan is a ULIP, it invests in various funds Equity, Debt, and Balanced funds.
These funds are created and managed by ICICI Pru itself. Also, they are not regulated by SEBI but IRDA.
The table below shows the performance of these funds until 31 January 2022.
Data Source: ICICI Pru Official
As you can notice from the above data, 7 of the 15 funds in the ICICI Pru Signature Plan relatively new funds with no long-term track record.
And even though the performance of equity funds seems to be on par with the equity mutual funds, that is not the case in reality. The past couple of years—2020 & 2021—have been a stellar year for the equity market.
Hence, while the 5 year CAGR of equity mutual funds reached an exceptional range of 18% and above, these funds managed to the 10%-13% range.
However, even though no one can predict the market, you can expect for this return rate to drop as the current market cycle completes. In addition, all of these funds have underperformed their respective benchmarks.
Balanced funds are expected to give returns around 10%. But they have delivered less than the expectation. Debt funds have delivered reasonably.
Therefore, the overall performance of ICICI Pru Signature Plan funds had been mediocre till January 2022!
For more details on each fund, you can visit the official website of ICICI Pru Signature Plan performance details.
Charges under the ICICI Prudential Signature Plan
1. Premium Allocation Charges
This charge is expressed as a percentage of the premium and it is deducted from the premium amount at the time of premium payment.
They are initial expenses at the time of policy issuance, such as underwriting, agent’s commission, medical expenses, etc.
It depends on:
- Premium Payment Option: Such as – ‘Single Pay’ and ‘Limited and Regular pay’.
For Single pay, the charges are fixed at 3%.
Limited and Regular Pay option varies with the mode of payment.
- The chosen mode of payment towards premium: Annual or non-annual.
If the payment mode is Annual, charges are levied as given below:
|1st Year to 7th Year||8th and 9th Year||10th Year||More than 10 Years|
|1st Year||2nd Year||3rd-7th Year||8th and 9th Yr.||10th Year||10+ Years|
Allocation charges of 2% are applicable for top-ups.
The total of Premium Allocation Charges (excluding Top-up premium allocation charges) deducted in the policy net of taxes will be added back to the Fund Value at the end of the 10th policy year.
The same amount will be added again to the Fund Value at the end of every 5th policy year thereafter. Percentage addition of annualized premium is given below with the premium payment term:
|Premium Payment Term||5 Years||7 Years||10+ Years|
|Addition as a % of one annualized Premium||25%||35%||40%|
2. Fund Management Charge
The Fund Management Charge is fixed at 1.35% of the fund value per annum.
However, if the monies are in the Discontinued Policy Fund, a Fund Management Charge of 0.50% p.a. will apply.
3. Public administration Charge
- For Single Pay option: Cost is ₹60 per month for the first 5 policy years
- For Limited and regular pay option: Cost is 0.183% of the annual premium to be payable per month, subject to the maximum of ₹ 500/- This charge is levied throughout the policy term!
This charge will be charged throughout the policy term!
4. Mortality Charge
Let’s figure out, how mortality charges can be made?
Mortality charges will be levied every month by the redemption of units based on the Sum at Risk. And, the sum at risk equal to the highest of Sum Assured, minimum death benefits, and Fund Value.
Indicative annual charges per thousand life cover for a healthy male and female life are as shown below:
That is, if a 30-year-old male has taken the life cover of Rs. 10 Lacs, then he will be paying Rs. 1060. It increases with age.
5. Discontinuance Charge:
For Single Pay option:
For Limited and Regular Pay Option:
If you surrender the policy during the first five policy years, your money will be transferred to Discontinued Policy (DP) Fund after deduction of applicable Discontinuance Charge
Review and Analysis of Premium Allocation Charges of ICICI Pru Signature Plan
The ICICI Pru Signature Plan does return the Premium Allocation charges in the form of a benefit.
But it makes one think, is it really an additional benefit or simply a trap to keep the investors?
As you have noticed, the premium allocation charges are 5% of the premium amount. And the minimum amount of your premium is ₹2 lakhs p.a. and goes up to 10 Lacs p.a. based on the plan option.
The hook is that there is a period of 10 years for you to get your premium allocation charges back!
Now, let’s do some calculation: 5% of ₹2Lacs is ₹10,000; and
5% of ₹10lakhs is ₹50,000.
So, your premium allocation charge is somewhere between ₹10,000 to ₹50,000, depending on the plan option you choose. After 10 years you will get this amount back without ANY interest.
Can you imagine?
In 10 year duration, if you invest this amount (₹10,000 –₹50,000) in a good Mutual Fund, the returns will be close to 3 times the investment!
There are other ULIPs today, who charges 1% – 3% premium allocation charges. Though they do not refund the premium allocation charge, still their premium allocation charges are less by 2%-4% as compared to ICICI Pru Signature Plan. Even if you invest this small fraction of percentage in a good Mutual Fund, your returns will be much more than the premium allocation charge you may get after 10 years.
For example, let’s say you invest 3% of ₹2 Lacs, that is, ₹6000. After 10 years you will receive almost triple of this amount, that is, approximately ₹18,000.
It is much higher than the original refundable Premium Allocation Charge of ₹10,000 that you receive after 10 years, with ICICI Pru Signature Plan!
Also, there are some ULIPs available today, who do not charge ANY Premium Allocation Charge.
Hence, refunding the Premium Allocation Charge is a way to lure the customer to stay invested for 10 long years. It is just to make you feel that you are not losing anything!!
But, based on the above analysis of Premium Allocation Charges, you got the catch, right?
Analysis & Review of ICICI Prudential Signature Plan:
What better way is there to review the ICICI Pru Signature Plan than to calculate the returns with an illustration?
Let’s take, for example, a 35 year old health male buying the ICICI Pru Signature Plan.
He is choosing 15 years policy term with a 7 year limited premium payment term. And he will pay an annual premium of ₹2 lakhs for a Sum Assured of ₹20 lakhs.
Based on these specs, the official ICICI Pru suggests a maturity value of ₹28.23 lakhs at an assumed fund return rate of 8% p.a.
Now, this looks fair, and the 8% CAGR is achievable by the equity funds of ICICI Pru Signature Plan.
But, the 8% CAGR does not mean that the investor gets the same investment return.
This may be confusing or surprising, but you can verify it in the IRR calculation table shown below.
While the ₹28 lakhs maturity value looked good, the net return rate from the policy reveals the truth. This big difference in the return rate is because of the various charges levied by the ICICI Pru Signature Plan.
Like every other ULIP, the ICICI Pru Signature Plan presents one thing and delivers another. A 5.54% return rate is something offered by fixed deposits and other assured return investment instruments.
And when we take the inflation rate—6%-8% average—into account, 5.5% or even 6% will be ineffective in the long-term. Hence in reality, your investments will be losing value in terms if real return.
Of course, the ICICI Pru Signature Plan funds have delivered more than 8% as per the past performance. But the point is that, the policy does not deliver the returns earned by the funds—and it is wildly misleading the policyholders.
No matter how much the ULIP’s funds earn, the charges in the ICICI Signature Plan will drag it down by at least 2% on all returns.
ICICI Pru Signature contains all top-notch features that any ULIP holder will like to have. But if you choose to invest in ULIPs, you may be compromising on your most important financial goals.
On the bright side, all hope is not lost.
There are better alternative investment options available…
Instead of investing in ICICI Pru Signature Plan, you may consider choosing the combination of Equity Mutual Fund and Term Policy.
This combination offers much better—inflation-beating—return, and far more flexibility and control over your investments.
The combination of Equity Mutual Fund and Term Policy contains all the benefits of ULIPs such as Fund Switching, Partial Withdrawal, All tax benefits, and more benefits in Long-Term Investments.
Apart from having all these benefits, the combination of Mutual Fund and Term Insurance also overcomes the limitations of ULIPs.
Returns of ULIP as compared to Mutual Funds: Who is better?
Are the returns of the ICICI Pru Signature Plan are lower than the returns of the Mutual Fund or higher?
Let’s find out by taking the below example:
We have already seen that the ICICI Pru Signature Plan has a better chance of delivering ₹28.22 lakhs returns at “8% CAGR” of the fund.
However, the same amount of investment in ELSS Mutual Funds will reap the returns in the range of 12%-15% CAGR.
We are particularly choosing the ELSS Mutual Fund because it offers the same tax benefit as the ICICI Pru Signature Plan u/s 80C of the IT Act, 1961.
And from the first year’s ₹1.5 lakh is deducted to buy a term insurance plan with a 15 year policy term for a ₹20 lakh Sum Assured.
So what will be the difference in the investment return?
See it yourself in the table below.
12% CAGR is a conservative assumption even for an average performing ELSS Mutual Fund.
And, the fund value at maturity is just shy of ₹48 lakhs. It is almost ₹20 lakhs higher than the return delivered by the ICICI Pru Signature Plan.
But that is not it at all.
As you can notice from the above example, the return of the ELSS Mutual Funds is still way higher than the ICICI Pru Signature Plan.
It is precisely ₹16 lakhs higher return than the ULIP.
Some key highlights of ELSS Mutual Funds are:
- Only 3 years lock-in period (5 years for ULIPs)
- Similar investment risk as ULIPs
- Far better returns
- Much diversified portfolio than ULIPs
- No hidden charges
- Higher liquidity
- Similar tax treatment as ULIPs
It is noteworthy that despite the common belief, the returns from ULIP policies are also taxable as per the amendment in section 10(10D) by The Finance Act, 2021.
1. Who is more Goal focused? Mutual Funds or ULIPs!
The Financial goals are the basic building block of any Financial Plan. Through any ULIP it is practically impossible to achieve any financial goal, due to their fixed lock-in periods and lesser returns in investments.
But, with Mutual Funds, you can list your short term (2-5 years) and long term (7+ years) goals and invest accordingly in the right scheme, where you will be benefitted by Higher Returns as compared to ULIPs.
This way, the investments in Mutual Funds provides a more focused and goal-oriented approach. For more details, read the 5-Steps Financial Planning Guide for beginners.
2. Fixed Lock-in Period
In ICICI Prudential Signature Plan there is a fixed lock-in period of 5 years and cancellation charges are significantly high as mentioned in the previous section.
But, If you want to cancel and come out from any Mutual Fund Scheme at any time, you can do so at the much lower cost as compared to ULIPs in the first year.
There are no cancellation charges in Mutual Funds from 1 year onwards.
3. Competitiveness of Fund managers: Mutual Fund Vs. ULIP!
Fund managers who are involved in managing Mutual Funds have a strong pressure to perform the best among their various competitors. Otherwise, investors may withhold their SIPs and invest in other mutual fund schemes, withdrawal of SIP may lead to the bad reputation of any scheme!
This competitive nature of work tends to maximize the profitability of the Mutual Funds significantly.
But with ULIPs there is no such pressure among their Fund Managers, as the returns are lower, plus there is 5 years of the lock-in period.
Therefore, the fund managers handling Mutual Funds are highly competitive as compared to their ULIP counterparts.
4. Regulatory Authority: Mutual Funds Vs. ULIPs:
Mutual Funds are regulated by a reputed agency called SEBI. Whereas, ULIPs are regulated by IRDA, which basically regulate insurance policies.
SEBI ensures greater security and safeguards against all frauds in the Mutual Fund or Stock investments. Whereas, SEBI has no such role to play in ULIPs.
IRDA’s regulations is predominantly focused on Insurance regulation and not on investment regulation. SEBI’s regulation is well evolved in regulating the investments, protecting investor’s interest and proactively taking measures to stop misselling.
If your purpose is investing and getting returns, then SEBI’s regulation is better for you.
5. Transparency in Investment: Mutual Fund Vs. ULIP:
Mutual funds are more transparent than ULIPs about the fees charged and the portfolio holdings. Also, there is a transparency in the level playing field in the Mutual Fund investment, as the categorization of the mutual funds is defined by SEBI. For example, if you choose to invest in the Large Cap Mutual Fund, your investment will be 100% in large-cap. And, you can easily compare various other Large-cap funds, and select the best choice.
Whereas the investment in the ULIP is rather complex, for example if you choose to invest in Large Cap funds through ULIP, it is NOT 100% in Large Cap; they may be exposed to Mid Cap or other category by 20%. Therefore, it becomes hard to compare one ULIP from another. The nature of ULIP investment is not transparent as compared to Mutual Fund investment.
6. Affordability of Insurance: Term Insurance Vs. ULIPs
Your investment in ULIP is divided among Insurance and Investment, you can choose to pay as a single payment or on a monthly basis. And the minimum premium amount is Rs. 2 Lacs per annum!
Existing Term Insurance plans come with much affordable price as compared to the ULIPs and provides the same amount of benefits. For more details about the Best Life Insurance policy, you can read this Cheat Sheet to select the best term insurance plan for you.
You will earn way better returns in the combination of Mutual Fund and Term Insurance as compared to ULIPs and you will have more control over your investments.
How to Surrender Your ICICI Pru Signature Plan?
Whether you are buying a ULIP or surrendering one, I suggest you consult your Financial Advisor before taking any step. They will be able to analyse the situation and help you make the right decision.
Surrender during the Free-Look Period:
Starting from the date of receipt of the policy document, you will have 15 day period to review the ICICI Prudential Signature Plan policy document.
If you find the policy terms and conditions are not satisfying, for any reason, you can surrender your policy. ICICI Prudential should process your surrender request in a matter of days. And your get a refund of your policy premium.
You can cancel your policy by filling up this Free-look form and submitting it to any of the ICICI Prudential Insurance branches.
Note: The Free-look period is 30 days in case you bought the policy online.
Surrender after the Free-Look Period:
Since the ICICI Pru Elite Life Super Plan is a ULIP, it has a lock-in period of 5 years. Hence you cannot get your fund value before that.
But you can still submit a surrender request before the completion of 5 policy years. In such a case, your policy will be considered a “Discontinued Policy” (like a paid-up policy). And all your investments will be moved to the “Discontinued Policy Fund” earning minimum return.
You do not have to pay any more premiums. And you will receive the fund value on completion of 5 policy years.
Steps to Surrender ICICI Pru Signature Plan:
To surrender your ICICI Pru Signature Plan, you need to fill the surrender form and submit it along with other documents at the nearest ICICI Prudential branch.
The documents are,
- Filled the Surrender Form
- Original Policy Document
- A signed copy of a photo ID (must carry original ID)
- A Cancelled cheque with policyholder’s name
Once you submit your surrender request, ICICI Prudential will process it within 10 working days and confirm the same.
Final Review: Should you invest in ICICI Pru Signature Plan?
So, what is our verdict on ICICI Prudential Signature Plan?
As we analysed earlier on various aspects, this ULIP policy is NOT up to the mark.
Do Not Invest in this ULIP!
Our suggestion is to invest in Mutual Fund (and/or PPF) and Term insurance policy separately. Not only they will provide you higher returns and risk benefits, it also takes away the limitations of any ULIP, including ICICI Pru Signature Plan.
And, also beware of the mis-selling of this ULIP by your bank. They may lure you to invest in this ULIP by showing its various benefits. But, after reading the complete analysis, we hope that you get a clear idea about this ULIP.
If you have any further questions, feel free to ask them in the comment section below.
For more details on your best-personalized investment plan, you can book your FREE Consultation call with us, by clicking the link below: