LIC’s Unit-Linked Insurance Plans – Features, Coverages & Benefits

LIC’s Unit-linked Insurance Plans

LIC has a variety of plans in its kitty. Each plan targets a specific customer group and fulfils a specific customer need. Traditional life insurance plans are meant to create guaranteed wealth while health plans aim to provide financial assistance in case of a medical emergency. Similarly, there are unit-linked plans which are different from guaranteed return plans as these plans invest in the capital market and don’t promise a guaranteed return. Let’s understand what unit-linked plans are all about.

What is a unit-linked insurance plan?

Unit-linked insurance plans, or ULIPs as they are popularly called, are insurance plans which promise the dual benefit of investment return and insurance cover. The premiums paid towards ULIPs are invested in market-linked funds. The policyholder can choose any fund as per his risk appetite. Thereafter, as the fund grows, the invested premiums also grow and give returns. ULIPs are also flexible in nature as they allow partial withdrawals during the plan tenure. Moreover, policyholders can change the chosen investment funds through switching and also invest additional premiums through top-ups.

Salient features of ULIPs

Unit-linked plans have the following salient features –

• The sum assured depends on the amount of premium paid
• In case of death, higher of the sum assured or the fund value is paid while on maturity the available fund value is paid
• The plan has a lock-in period of 5 years after which partial withdrawals can be done from the fund value
• Each top-up premium also has a corresponding sum assured which increases the overall coverage under the plan
• On maturity, the policyholder can also choose to avail the maturity proceeds in instalments over the next five years to allow the investment to grow
• The premiums paid for unit linked plans are allowed as tax-free deductions under Section 80C upto a maximum of INR 1.5 lakhs. Moreover, the benefits received under the plan are also completely tax-free in the hands of the policyholder. Thus, unit linked plans also provide tax benefits.

ULIPs offered by LIC

LIC, currently, offers only one Unit linked insurance plan which is called LIC’s New Endowment Plus Plan.

The features and benefits of the plan are as follows –

• The plan offers an optional rider which covers accidental death and disablement
• The premiums are affordable starting at INR 20,000
• Four investment funds are offered to the policyholder for investing the premium
• Four free switches are allowed in a policy year
• The plan is available even for minors aged 90 days and above. However, in case of minors, coverage of risk starts either when the minor attains 8 years of age or two years after commencement of the plan.
• The basic sum assured is expressed as either ten times the annual premium or 105% of the total premiums paid, whichever is higher.

FAQ’s