LIC Wealth Plus

Post the date of closure of the plan, the investment pattern will follow that of the Wealth Plus Fund. 

Life Insurance Corporation is India’s most trusted life insurance company. In fact even today, it has a majority market share of a whopping 77% of the total life insurance business in the country, with competition from 23 other life insurers. LIC has an enviable claim settlement ratio of 98.14%, the highest amongst all life insurance companies, making it the first choice of customers. This means that of all the claims the company receives, it honours 98 cases out of 100. LIC continues to dominate new premium collections. Being a public sector undertaking with government backing, the company is unlikely to fail unlike many of its private counterparts. LIC has a massive customer base of over 250 million people. 

LIC Wealth Plus – Features

• The policy term of LIC Wealth Plus plan is 8 years, with an extended life cover for 2 years after the completion of the policy term

• The LIC Welath plus NAV of the fund is subject to a minimum of Rs. 10

• LIC Wealth Plus plan is available for sale for a limited period only

• The premium paid towards LIC Wealth Plus will be used to purchase units of the fund after factoring in the premium allocation charge

• The Wealth Plus Fund is subject to multiple charges

• The value of units of the fund will vary, i.e. increase or decrease, depending on the NAV

• LIC Wealth Plus guarantees the highest NAV recorded on a daily basis in the first 7 years of the policy, subject to a minimum of Rs. 10. The guarantee applies only to the payment made at the end of the LIC Wealth Plus policy term, regardless of partial withdrawals made during the LIC Wealth Plus policy tenure

• LIC Wealth Plus also offers the option of an Accident Benefit rider 

LIC Wealth Plus – Benefits

• Death Benefit: In case the life assured dies during the LIC Wealth Plus policy term, the nominee will receive death benefit which would include Sum Assured under the basic LIC Wealth Plus plan and policyholder’s fund value

• Extended life cover period: In case the life assured dies after the LIC Wealth Plus policy term, but before the expiry of the extended life cover period, the nominee will receive only the Sum Assured under the basic LIC Wealth Plus plan

• Survival Benefit: If the life assured survives the LIC Wealth Plus policy term, he or she will receive an amount equal to the policyholder’s fund value on the basis of the higher value between highest NAV registered over the first 7 years of the LIC Wealth Plus policy or the NAV applicable at the end of the LIC Wealth Plus policy term

• Additional Payout for Accident: In case Accident Benefit rider has been opted for and the policyholder dies due to an accident, an additional sum equal to Accident Benefit sum assured will be paid under LIC Wealth Plus

• Partial Withdrawals: LIC Wealth Plus allows partial withdrawals under certain select circumstances after the third policy anniversary 

LIC Wealth Plus – Product Specification

Grace Period: LIC Wealth Plus policy lapses if the premium is not paid within the days of grace available under the LIC Wealth Plus policy. LIC Wealth Plus – Policy Details 

• Cooling Off Period: If the policyholder is not satisfied with the terms and conditions of the LIC Wealth Plus policy, he or she can return the LIC Wealth Plus policy within 15 days. The refundable amount to be paid in case the LIC Wealth Plus policy is returned within the cooling-off period is calculated as under:

  Value based on units in the policyholder’s fund

  (+) Unallocated premium

  (-) Policy Administration charge

  (-) Charges @ Rs. 0.20 per every Rs. 1,000 of Sum Assured under the basic LIC Wealth Plus plan

  (-) Cost of medical examination and special reports (if any) at actuals 

• Loan: No loan is available under LIC Wealth Plus plans 

• Assignment: Assignment is allowed under LIC Wealth Plus 

• Reinstatement: An LIC Wealth Plus policy once surrendered cannot be reinstated 

• Policy Surrender: LIC Wealth Plus plans can be surrendered only during the policy term (and not during the extended life cover period) and there is no surrender charge. The surrender value (if any) is payable only after the completion of the third LIC Wealth Plus policy anniversary under either type of premium paying term – single or 3 years (regular basis). The surrender value is equal to the policyholder’s fund value on the date of surrender. 

• Exclusions: In case of suicide committed by the life assured within the first 12 months of LIC Wealth Plus policy from inception, LIC will not accommodate any claims under the LIC Wealth Plus policy. The company will only pay the policyholder’s fund value on death. 

How Does LIC Wealth Plus Work

Let us understand how does this plan work with the help of an example: 

Policyholder: Mr. Patel, a 35-year-old businessman

Investment Amount: Rs 50,000 (Single Premium Payment)

Policy Term: 8 years (with an additional 2-year cover)

Sum Assured: Rs 1.2 lakh

Investment Fund: Balanced Fund (Medium Risk, expected returns around 10% annually, depending on market conditions)

• Scenario 1: Mr. Patel diagnosed with a terminal illness and passes away after 4 years:

  Outcome: Nominee receives the death benefit equivalent to the fund value at the time of death.

  Estimated Fund Value: Rs 1.8 lakh (based on market conditions)

• Scenario 2: Mr. Patel remains healthy, and the policy reaches maturity after 8 years:

  Outcome: Mr. Patel receives the accumulated value of the fund.

  Estimated Accumulated Fund Value: Rs 2 lakh (based on expected market returns)

• Scenario 3: Mr. Patel passes away 9 years after purchasing the policy:

  Outcome: Since the policy includes an additional 2-year cover, the nominee will receive the sum assured, i.e., Rs 1.2 lakh.

Unit Linked Insurance Plans (ULIPs) – Benefits

For those of you wondering how ULIPs can help you, read to find the many benefits of these insurance plans. ULIPs are ideal wealth creation instruments. Some of their noteworthy benefits are mentioned below: 

Potential for Good Returns

ULIPs offer the prospect of promising returns by investment in equity, debt and other forms of investment. Depending on one’s investment appetite and risk taking capability, one may choose a fund with higher skew towards equities which offer higher returns, albeit with greater risk. Or one may choose a fund with greater representation of debt to reduce the volatility of returns. Young people can opt for equity-focussed funds in their 20s and 30s, and gradually move towards debt funds. 

Transparency

ULIPs are one of the most transparent financial products available in the market. Their charge structure, expected Internal Rate of Return (IRR), value of investment, etc. are shared before hand with prospective customers. The account statement, quarterly investment portfolio and daily Net Asset Value (NAV) ensure that policyholders are adequately aware of the status of their investment portfolios. Life insurance companies publish the latest NAVs on their websites on a daily basis. 

Liquidity

Another great advantage of a ULIP is their liquid nature. ULIPs allow partial withdrawals to take care of emergencies and sudden requirements of funds. Most ULIPs allow the policyholder to withdraw funds after 5 years to a great extent, leaving only a minimum stipulated amount in the unit linked account. 

Flexibility and Control of Investments

Another hallmark of ULIPs is the flexibility to control one’s investments. Based on one’s investment objectives, goals, life stage and risk-taking ability, one can choose from available funds under a unit linked life insurance plan. Each fund has a different objective and consequently invests in different degrees in equity, debt, bonds, cash, government securities etc. A range of high, medium and low risk investment options are available under a single unit linked plan. 

If at any point in time, one feels that a fund is not meeting one’s requirements, one can switch the fund to another available fund which meets requirements better. This is called fund switching. ULIPs also allow premium redirection i.e. future allocation of premiums in chosen funds. If additional funds are available to a policyholder, he or she can by way of top-up, increase the existing investment in a ULIP. 

Multiple Benefits in One Product

A single product, a unit linked life insurance plan, offers several benefits. Not only does it provide a life cover, it also provides various investment opportunities in addition to tax benefits. 

Inculcate the Habit to Save Regularly

ULIPs are a great way to instil discipline and the habit to save regularly. It has been found that the average unit costs are likely to be lower than the cost of one time investment. 

Good for Hands-Off Investors

ULIPs are a good choice of investment for investors who do not have sufficient time to actively monitor their investments. A unit linked life insurance plan allows one to take the advantage of market linked growth without actually participating in the stock market. If at any point, one feels that one wants greater returns, one can switch to a high-growth fund having higher investment in equity. 

Tax Benefits

ULIPs are also an effective tax saving instrument. One can avail several tax benefits under the Income Tax Act 1961 by investing in ULIPs. Life insurance plans are eligible for deduction under Section 80C. Section 80D allows tax relief for life insurance plans as well as critical illness riders. LIC Wealth Plus Plan 801 maturity amount and withdrawals are exempt under Section 10(10D) subject to norms prescribed in the section. 

Ability to Enhance the Cover by Choosing a Rider

ULIPs also allow flexibility of customising the plan by choosing an option rider. Riders grant additional, supplementary benefits and enhance the cover of the main insurance policy. Examples of common riders are critical illness benefit rider, accident and disability benefit rider, premium waiver rider.

Summing Up

LIC Plan 801 Wealth Plus offered a unique blend of investment opportunities and insurance coverage, making it an attractive option for policyholders seeking both wealth creation and financial security.

While it was available for a limited period, the plan provided a guaranteed higher of the two NAVs at the end of the policy term, safeguarding investments from market fluctuations. With its benefits, such as death, survival, and extended life cover, along with flexibility in premium payment terms, LIC Wealth Plus was a reliable choice for individuals looking for a secure and potentially profitable investment solution.

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