ICICI Pru LifeTime Premier ULIP wealth creation policy review

Monday, March 28, 2011, 5:14 by Business Editor

ICICI Pru LifeTime Premier from ICICI Prudential is a wealth creation policy and insurance plan rolled into one.

“Rome Wasn’t Built in a Day,” they say–so true! As with most things in life, wealth creation, too, requires perseverance and patience over a long period of time (unless, of course, you get lucky with some bumper lottery bonanza!).

While most Indians have enjoyed a significant increase in their salaries–and consequently, an improvement in their lifestyles–over the last 10 years (thanks to an expanding economy), the cost of living has also gone up substantially. And with inflation (read, soaring prices of goods and services) likely to remain a problem in the long term, wealth creation assumes that much more importance.

The ‘ICICI Pru LifeTime Premier’ plan from ICICI Prudential, a joint venture between ICICI and UK insurance major Prudential, is one such ‘wealth creation’ policy–with the added advantage of being an insurance product.

Put simply, this is a insurance-cum-investment scheme that protects you (the policyholder) against the risk of death, and invests your premiums–net of applicable charges–in various asset classes such as stocks and bonds, promising to generate a pretty decent return over the long term.

And since it invests the policy owner’s money in market-linked instruments, the ‘LifeTime Premier’ is not a traditional insurance (read, plain-vanilla term insurance) plan–rather, it’s a unit-linked insurance policy (ULIP).

In essence, this ‘life risk + investment’ plan offers a fixed figure (called, the Sum Assured) to the beneficiary/nominee of the policyholder in case of his death during the term of the policy. Also, it pays out a lump-sum amount at the maturity of the policy (i.e. when the policy ends).

Policy at a glance Regular Pay mode (refers to a flexible  duration of premium payment) Limited pay mode (refers to a fixed duration of premium payment)
Premium Payment Term Regular pay 5 years
Premium payment frequency Annual
Entry Age (minimum – maximum) 7-65 years
Maturity Age (minimum – maximum) 18-75 years
Policy Term 10, 15, 20, 25, 30 years 10 years
Minimum Sum Assured (for entry age <45 years) Higher of (10 × annual premium) and (0.5 × Policy Term × annual premium)
Minimum Sum Assured (for entry age >=45 years) Higher of (7 × annual premium) and (0.25 × Policy Term × annual premium)
Maximum Sum Assured As per maximum Sum Assured multiples
Minimum Premium (in Rs.) 18,000 50,000

Key characteristics –
1.    Death Benefit: If the insured individual dies during the course of the policy, then his nominee will be awarded the Sum Assured, along with the Fund Value subject to Minimum Death Benefit.

2.    Maturity Benefit: When the ‘wealth ULIP’ matures, the Fund Value–including Top-up Fund Value (if any), will be paid. Else, one can select a settlement option.

3.    Settlement Option: If you don’t want to take the Maturity Benefit when policy term ends, then ICICI Pru lets you receive the Fund Value in staggered payouts on an annual, half-yearly, quarterly or monthly frequency, over a period of one to five years. One can, if he changes his mind, redeem the entire Fund Value at any time during this settlement period.

4.    Loyalty Additions: Subject to the payment of all due premiums, the company–beginning from the end of the 10th policy year–will add a so-called loyalty benefit to your fund corpus at the end of every fifth policy year. This amount will be equal 2% of the average of Fund Values on the final day of eight policy quarters preceding the given allocation.

Let’s say, the Fund value corresponding to Net Asset Value (NAV) at the end of the first quarter (Q1) is x1, with x2, x3 and x4 defining the corresponding Fund Values at the end of the second, third and fourth quarters, respectively, in a policy year.

So, if you buy this policy on April 1st, 2011, then –

Loyalty Addition = 0.02*(((x1 + x2 + x3 + x4) for 2020 + (x1 + x2 + x3 + x4) for 2021))/8)

5.    Flexible premium payment options: As mentioned earlier, one can go in for either a ‘Regular Pay’ mode (make premium contributions throughout the policy term) or ‘Limited Pay’ option (premiums for a fixed duration).

6.    Top-up: The policy owner is offered the flexibility of paying additional premiums–subject to a minimum amount of Rs. 2,000–any time during the term of the plan, except during the final five years of the policy tenure. Needless to say, he will see his Sum Assured get increased accordingly.

However, it should be noted that one can’t withdraw any top-up premium for a period of five years from the date of payment of the said top-up amount for the purpose of partial redemptions only.

7.    Choice of multiple portfolio strategies: As far as investment options are concerned, the ‘ICICI Pru LifeTime Premier’ plan provides the following two portfolio strategies for you to select from –

a.    Trigger Portfolio Strategy – The Life Assured’s premiums, net of relevant charges, will be initially be spread across two funds–Multi Cap Growth Fund, a stock-centric vehicle, and Income Fund, a debt (bonds) oriented fund–in a 75%: 25% ratio.

Depending on a pre-defined trigger event (a 15% upward or downward movement in the NAV of the Multi Cap Growth Fund due to market volatility), the company may subsequently revise the afore-mentioned fund allocation.

b.    Fixed Portfolio Strategy – Under this strategy, the policy owner can choose from any of the eight fund options outlined below, and can switch between them.

Fund name Asset classes invested in (as a % of overall fund portfolio)
Equity & Equity Related Securities Debt, Money Market & Cash
Opportunities Fund (Invests in Resources, Investment-related, Consumption-related and Human Capital-oriented company stocks and their equity related instruments) 80-100% 0-20%
Multi Cap Growth Fund (Invest in equity and equity-linked securities of large-, mid- and small-cap companies) 80-100% 0-20%
Bluechip Fund (Largely invests in NIFTY-listed stocks) 80-100% 0-20%
Multi Cap Balanced Fund (Invests in a large-, mid- and small- cap stocks, as well as debt and debt related instruments) 0-60% 40-100%
Income Fund (Invests in several fixed income instruments). None 100%
Money Market Fund (Invests in ultra-safe debt and money market securities) None 100%
Return Guarantee Fund (Invests in a broad range of top-rated fixed income instruments) None 100%
Dynamic P/E Fund (Invests in stocks, based on the P/E multiple on the NIFTY 50, as well as in debt instruments, money market and cash) 0-100%

8.    Change in Portfolio Strategy: You have the option of switching from the ‘Trigger’ portfolio strategy to ‘Fixed’ mode, and vice versa, once every policy year–without having to pay any extra cost.

9.    Increase/Decrease of Sum Assured: The policyholder can enhance or reduce his Sum Assured at any policy anniversary during the tenure of the policy.

10.    Tax Benefits: One can claim tax relief for premiums paid and benefits received as per the Income Tax Act.

Limitations –
1.    Partial Withdrawal Benefit: The ‘ICICI Pru LifeTime Premier’ plan allows you to withdraw money–subject to a minimum amount is Rs. 2,000–only after completion of five policy years. You can undertake one partial redemption every policy year, up to a maximum of 20% of the Fund Value.

2.    Surrender: This ULIP disallows any surrender during the first five policy years. After the completion of the fifth policy year, the scheme shall cease to exist and the Fund Value including the Top-up Fund Value, if any, will be awarded.

Sample case for a healthy male life for Regular Pay

Entry Age 30 years
Annual Premium (in Rs.) 50,000
Premium payment option Regular
Mode of premium payment Yearly
Sum Assured (in Rs.) 5,00,000 (10 x Annual Premium)
Choice of Portfolio Strategy Fixed (100% investments in Multi Cap Growth Fund)
Policy Term 10 years
*Fund Value at Maturity (in Rs.) 6,05,013 (assuming a Gross Yield of 6%) 7,54,195 (assuming a Gross Yield of 10%)
Death Benefit during the 1st year of the policy 5,46,693 (assuming a Gross Yield of 6%) 5,48,469 (assuming a Gross Yield of 10%)
Death Benefit during the 5th year of the policy 7,60,380 (assuming a Gross Yield of 6%) 7,92,250 (assuming a Gross Yield of 10%)
Death Benefit during the 10th year of the policy 11,05,013 (assuming a Gross Yield of 6%) 12,54,195 (assuming a Gross Yield of 10%)

*Net of all charges, service tax and education cess

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