LIC is generally known for its traditional endowment and moneyback policies. But many may not know that there are few LIC ULIP Plans as well. And one of them is LIC Nivesh Plus Plan (Table No. 849).
LIC Nivesh Plus is a non-participating, unit-linked, single premium insurance plan, where the policy offers dual benefit of investment as well as life insurance coverage throughout the policy’s term for a single premium. Like all other ULIPs, even this plan gives the option choosing your premium to be invested in one of several different (4) types of investment funds.
If you want to know more about this LIC Nivesh Plus Plan Review (2023) article, then you will get to know all the LIC Nivesh Plus Plan Details and LIC Nivesh Plus Policy Benefits here.
LIC had launched this policy (LIC Table No. 849) for the first time in February 2020 under the UIN 512L317V01.
Website link to Policy page – Link
LIC’s Nivesh Plus is a Unit Linked Life Insurance product, which is different from the traditional insurance products. Let us now have a look at the LIC Nivesh Plus (Plan No.849) features, benefits and review it.
How does LIC Nivesh Plus plan work?
LIC Nivesh Plus is a single premium ULIP plan. You need to pay a lumpsum amount as premium only once, i.e. at the time of purchase of LIC Nivesh Plan policy at the start. You need to choose the policy term between 10 to 25 years. You also have to choose between the 2 options for sum assured (discussed later) and this has major tax implications (which too we will discuss later). Then the money you give as premium is then invested in the (4) funds of your choice. After deduction of various charges, the remaining amount when invested, will result in units being allotted to you in the chosen fund based on LIC ULIP funds NAV. Each unit that is allotted/purchased has a NAV (Net Asset Value). The redemption or maturity payout too will be based on the NAV which keeps growing overtime. Like other typical endowment plans by LIC, in this LIC Nivesh Plus ULIP also you get some Guaranteed Additions.
That is the brief summary of the working of LIC’s Nivesh Plus ULIP.
Note – The other ULIP offering by LIC is called LIC SIIP Plan No. 852, which I had reviewed earlier (LIC SIIP Review). And no, there is no connection with mutual fund SIPs in this if you think so because of the similarity in name.
Let’s move on to the details now.
LIC Nivesh Plus Plan (Plan 849): Features & Review
- LIC Nivesh Plus is a ULIP or unit-linked insurance plan. A Ulip is a hybrid product which combines investment and insurance. The (single) premium paid in this plan is used in 2 parts – i) a smaller part is used to provide a life insurance cover throughout the policy’s tenure, and ii) the remaining larger portion of the premium is invested in equity and debt to generate returns. And since this is a ULIP, this means that there are no guarantee of returns, which many people have come to associate with LIC policies.
- Since this is a Single Premium plan, you need to pay the policy premium only once, at the time of buying LIC Nivesh Plus policy.
- Interestingly, the policy offers a choice of picking between 2 Sum Assured (SA) options. And this choice has a huge implication on taxation of the maturity amount. So there are two sum assured options. Option-1 is 1.25 times the Single Premium. Option-2 is 10 times the Single Premium. And once you choose the option at the start, it cannot be changed.
- Policy Term can range from 10 to 25 years, depending upon policyholder’s age at start and the Sum Assured option chosen.
- The Minimum Entry Age for the policy is 90 days for both Option-1 (SA = 1.25 times premium) and Option-2 (SA = 10 times premium)
- The Maximum Entry Age for the policy is 70 years for Option-1 (SA = 1.25 times premium) and 35 years for Option-2 (SA = 10 times premium)
- The Minimum Maturity Age for the policy is 18 years for both Option-1 and Option-2
- The Maximum Maturity Age for the policy is 85 years for Option-1 (SA = 1.25 times premium) and 50 years for Option-2 (SA = 10 times premium)
- The Policy Term also varies for different options. It is 10-25 years for Option-1 (SA = 1.25 times premium). But for Option-2, it varies based on entry age. So it is 10-25 years if entry age is less than 25 years. For age 26-30, the policy term can be in the range of 10-20 years, And for ages 31-35, the policy term will be 10 years only.
- The Minimum Premium is Rs 1 lakh for the policy.
- There is no upper limit on the Maximum Premium for this policy.
- Being a ULIP, the plan has a lock-in-period of 5 years. though you can still surrender before 5 years after paying the discontinuation charges.
Maturity Benefits of LIC Nivesh Plus Plan (849)
If the policyholder survives the entire policy term, then an amount equal to the unit fund value is paid. This will be calculated as the number of units multiplied by the NAV on the day of maturity.
Death Benefit – In case of death of policyholder before the risk commencement of the policy, amount equal to unit fund value will be paid to the nominee. In case of death of the policyholder after the risk commencement of the policy, Basic Sum Assured or unit fund value, whichever is higher, is paid to the nominee.
Guaranteed Additions in LIC Nivesh Plus Plan (849)
Like many other LIC policies, even this LIC ULIP plan or LIC Nivesh Plus comes with guaranteed additions
To further attract people and increase returns to some extent, LIC Nivesh Plus offers guaranteed additions as bonus or loyalty benefits (as a percentage of annualized premium) that are added to policy after completion of fixed number of years.
The guaranteed additions are as follows:
- At the end of 6 years – 3% of annualized premium as loyalty benefit
- At the end of 10 years – 4% of annualized premium as loyalty benefit
- At the end of 15 years – 5% of annualized premium as loyalty benefit
- At the end of 20 years – 6% of annualized premium as loyalty benefit
- At the end of 25 years – 7% of annualized premium as loyalty benefit
The allocated Guaranteed Addition shall be converted to units based on NAV of the underlying Fund type as on the date of such addition and shall be credited to the Unit Fund.
4 Fund Choices in LIC Nivesh Plus Plan (849)
Once you pay the premium and buy LIC Nivesh Plus, the allocated premiums will be used to buy units as per the fund type opted by the Policyholder out of the 4 fund options available.
The fund options and their investment strategies are as follows:
- Bond Fund – It will invest at least 60% or more in Government/Corporate Debts + 40% or less in Money Market instruments + Nil in Equity instruments. This fund has a Low Risk Profile and has the defined strategy “To provide relatively safe and less volatile investment option mainly through accumulation of income through investment in fixed income securities.”
- Secured Fund – It will invest 45-85% in Government/Corporate Debts + 40% or less in Money Market instruments + at least 15% in Equity instruments. This fund has a Lower-to-Medium Risk Profile and has the defined strategy “To provide steady income through investment in both equities and fixed income securities.”
- Balanced Fund – It will invest 30-70% in Government/Corporate Debts + 40% or less in Money Market instruments + 30-70% in Equity instruments. This fund has a Medium Risk Profile and has the defined strategy “To provide balanced income and growth through similar proportion investment in both equities and fixed income securities.”
- Growth Fund – It will invest not more than 20% in Government/Corporate Debts + 40% or less in Money Market instruments + 40-80% in Equity instruments. This fund has a High Risk Profile and has the defined strategy “To provide long term capital growth through investment primarily in equities.”
The actual name of the four funds are –
LIC Nivesh Plus – Bond Fund, LIC Nivesh Plus – Secured Fund, LIC Nivesh Plus – Balanced Fund, and LIC Nivesh Plus – Growth Fund. Here is the current NAVs (as of June 2023) in the image below (from Moneycontrol) –
If you are invested in any of these plans, then you should keep a close watch on fund performances – LIC Nivesh Plus Bond Fund performance, LIC Nivesh Plus Secure Fund performance, LIC Nivesh Plus Balanced Fund performance, and LIC Nivesh Plus Growth Fund performance.
The Policyholder has the option to choose any ONE of the above 4 funds. And the plan allows for 4 free switches in a year during the policy term. For every switch after the 4 free ones, a charge of Rs. 100 will be deducted. This charge is deducted by reducing the number of units you hold.
So it’s like a ULIP where you can change between funds. But you can’t have partial allocation to more than one fund. You have to pick one and 100% of your investment portion will be moved to that chosen LIC Nivesh Plus fund.
LIC Nivesh Plus: Which Sum Assured Option to choose?
This is important. As I mentioned earlier, the choice of sum assured will decide your policy taxation! LIC Nivesh Plus plan offers 2 sum assured options to choose from:
- Option-1 – 1.25 times the Single Premium
- Option-2 – 10 times the Single Premium
Once you choose the option at the start, it cannot be changed later.
As per the current taxation rules in Section 10(10D) of the Income Tax Act, if the policy premium is greater than 10% of Sum Assured, then the maturity amount is taxable!
Ouch. And does this rule fit on LIC Nivesh Plus Plan?
Yes for the 1st option. As you see, in the first option the premium to be paid for LIC Single is one-time, and therefore a large amount which is a lot more than 10% of the sum assured (or sum assured being 10 times of premium). In fact, it is where sum assured is just 1.25 times the premium! And that makes the Option-1 of LIC Nivesh Plus maturity payout taxable.
In Option-2 (where Sum Assured is 10 times single premium), this condition is met and hence, the maturity proceeds will be tax exempted.
Now let’s see some examples of LIC Nivesh Plus.
LIC Nivesh Plus Option-1 Example & Illustration
LIC has provided interesting illustrations in its policy brochure.
Here is the 1st one:
In this, a 30-year old investor chooses Option-1 (Sum Assured equal to 1.25 times Annual Premium) and invests Rs 1 lakh in this single premium LIC Nivesh Plus ULIP plan for 20-year policy term.
If the investor remains invested for 20 years, his investment would grow to Rs 3.53 lakh assuming gross returns of 8%. Why am I saying gross returns? Because if you calculate, the net returns are just 6.51% as the remaining returns would have been eaten up due to ULIP charges which are charged using unit cancellations from the policy. Had you got the full 8% actual returns the value of investment would have been Rs 4.66 lakh.
And lets not forget that this is Option-1, and hence, the maturity amount above is fully taxable!
LIC Nivesh Plus Option-2 Example & Illustration
Here is the 2nd one:
In this, a 30-year old investor chooses Option-2 (Sum Assured equal to 10 times Annual Premium) and invests Rs 1 lakh in this single premium LIC Nivesh Plus ULIP plan for 20-year policy term.
If the investor remains invested for 20 years, his investment in this option would only grow to Rs 2.67 lakh assuming gross returns of 8%. The actual net returns are just 5.05% as the remaining returns would have been eaten up due to ULIP charges which are charged using unit cancellations from the policy. The charges in Option-2 are higher because of higher mortality charges due to higher sum assured.
The maturity amount above is tax exempt.
Comparing the 2 options, we can see that while Option-1 will give higher returns and bigger corpus though life cover via sum assured will be bigger in Option-2.
Partial Withdrawals in LIC Nivesh Plus
Since it’s a ULIP, it has a 5-year lock-in. But partial withdrawals are allowed after completing 5 years of the policy term. It is in the form of withdrawal of fixed number of units. In case of minors, partial withdrawals are allowed after age 18.
The Maximum amount of Partial Withdrawal as a percentage of fund during each policy year shall be as under:
- From Policy Year 6-10, maximum of 15% of the fund value can be withdrawn.
- From Policy Year 11-15, maximum of 20% of the fund value can be withdrawn.
- From Policy Year 16-20, maximum of 25% of the fund value can be withdrawn.
- From Policy Year 21-25, maximum of 30% of the fund value can be withdrawn.
Surrendering LIC Nivesh Plus
On surrender of the policy within the 5 year lock-in, unit fund value minus the discontinuation charge is paid. On surrender of policy after the 5 year lock-in period, entire unit value is paid.
The discontinuation charges are as follows:
Loans under LIC Nivesh Plus
You cannot get a loan under LIC Nivesh Plus plan. Loans are not permitted for ULIPs generally also.
Unlike many other LIC endowment plans, you don’t get a loan under this plan as it’s a ULIP. Many LIC policyholders regularly take loans against their LIC and hence want this feature. But this isn’t available in LIC Nivesh Plus plan.
LIC Nivesh Plus (Plan 849): Charges and How it Reduces Returns?
ULIPs have had a bad name for high charges in past. Being a ULIP itself, even LIC Nivesh Plus has various charges.
- Mortality Charges – Policyholders of the LIC Nivesh Plus Plan will be required to pay a mortality charge at the start of each policy month, which will be based on the sum at risk. The charge depends on the Sum at Risk, which is defined the difference between the Basic Sum Assured and the Fund Value on the date of deduction of this charge. The charge will be deducted only if the Basic Sum Assured is greater than your Fund Value. Generally, the mortality charges increase with age of the policyholder as risk increase with age. But in this ULIP, as age increases, the fund value also increases and it reduces the risk proportionately for the insurer. So the sum-at-risk for LIC goes down gradually and therefore, the impact of mortality charges also goes down in LIC Nivesh Plus.
- Premium Allocation Charges – At the time of buying the policy, LIC collects premium allocation charges, which are then adjusted with the single premium paid. The following are the premium allocation charges that policyholders must pay: i) Online Sale: 1.50% and ii) Offline Sale: 3.30%. So for example, if you have purchased this plan through an offline mode and are investing Rs 1,00,000 then 3.30% of this will be deducted before your funds are used to purchase any units. So only Rs 96,700 will be used to purchase units in the first year after LIC deducts Rs. 3,300 as Premium Allocation Charge.
- Fund Management Charges – As the name implies, this fee is collected by the company in order for the LIC Nivesh Plus Plan to administer your money, which will be based on the Net Asset Value.
- Accident Benefit Charges – This is deducted only if you have taken the LIC’s Linked Accidental Death Benefit Rider. It will be charged at the beginning of each month by deducting units you hold. This shall be at the rate of 0.4 per 1,000 of the Accidental Benefit Sum Assured.
- Partial Withdrawal Charges – For every partial withdrawal, a charge of Rs. 100 will be deducted. This charge is deducted by reducing the number of units you hold.
- Dis-continuation Charges – This charge will be applied if wish to surrender the policy after 5 years.
What returns will LIC Nivesh Plus plan give?
Remember first that this is an insurance-cum-investment hybrid product. So a part of the premium goes away to provide insurance cover. Only the remaining premium gets invested.
Let’s see what LIC has to say about LIC SIIP returns now. Depending on the option chosen from 2 available ones based on sum assured, the Net Returns will vary from 5.05% to 6.51% when LIC uses gross 8% for calculations. The actual returns will depend a lot on how the fund chosen is performing.
But if you compare this with pure equity funds where if you invest Rs 1.2 lakh every year (say via Rs 10,000 monthly SIP), then after 25 years, you can have close to Rs 1.75 crore if we assume returns of 12%!
So LIC Nivesh Plus (Plan 849) is not attractive at all as an investment for most people.
That was about the calculation of returns using LIC Nivesh Plus Return Calculator.
LIC Nivesh Plus: Should you invest (2023)?
As for most things hybrid and ULIPs, the advice is generally to avoid. Best to never mix investment and insurance – something on which ULIPs, endowment and moneyback plans are built on.
Please beware of common mis-selling by LIC agents that they are known for. Please don’t buy LIC Nivesh Plus even if your family LIC agent (or LIC uncle or aunt) want to give you some personal discounts to invest in it. You will neither get good returns nor get a big enough life insurance cover with this plan.
It is as simple as that.
Hopefully, you would have found this LIC Nivesh Plus Review useful and the policy details and LIC Nivesh Plus Policy Benefits (2023) would be clear by now. But please make sure you understand and assess the suitability of this product first.