LIC Samridhi Plus unit-linked guaranteed NAV insurance policy review

Tuesday, April 5, 2011, 9:19 by Business Editor

Launched on 25th February, 2011 by Life Insurance Corporation, Samridhi Plus is a unit-linked insurance policy which offers protection against mortality risk (death) as well as an investment option.

In other words, the policy pays out a lump-sum amount, or Sum Assured, to the insured individual’s nominee/beneficiary in the event of his demise during the term of the scheme.

Side by side, LIC also invests a significant proportion of your premiums–net of applicable charges–to buy so-called “Units” in a dedicated Samridhi Plus investment fund, which allocates the corpus across several asset classes such as stocks and bonds. Remember that the Net Asset Value (NAV) of this fund is subject to several charges and the value of the units may rise or fall, depending on market conditions. Also read: Top term insurance plans

Key characteristics

1.      Guaranteed Net Asset Value: The standout feature of the Samridhi Plus plan is its promise of delivering a “guaranteed NAV” at the end of the policy. Put simply, the company claims that on maturity of the plan, it will pay the Fund Value based on higher of the highest NAV registered by the Samridhi Plus fund over the first 100 months of the scheme–subject to a minimum NAV of Rs.10–and the NAV as applicable on the date of maturity.

Here is an example –

Guaranteed  Net Asset Value of the Samridhi Plus Fund (based on highest NAV over the first 100 months of the policy (A) NAV of the Samridhi Plus Fund on the date of maturity (B) Higher of A and B (C) Number of your units in Samridhi Plus Fund on the date of maturity (D) Maturity Benefit (C x D)
Scenario 1 Rs. 16.00 Rs. 18.00 Rs. 18.00 9,000 Rs. 1,62,000
Scenario 2 Rs. 16.00 Rs. 15.00 Rs. 16.00 9,000 Rs. 1,44,000

So, basically, when the policy term ends (i.e. the plan vests), LIC promises to pay a figure equalling the higher of the guaranteed NAV and the NAV on the date of maturity, multiplied by the number of units available in your account at the end of the policy tenure.

One should also keep in mind that the period to be counted for guarantee of NAV shall be 100 months from 25th February (the date of commencement of plan). Suggested reading: Top critical care health insurance policies compared

2.      Death Benefit: If the insured person passes way during the course of the policy, then his nominee will receive the Sum Assured or the Fund Value, whichever is higher.

But, in case of partial withdrawal having been made during the last two years from the date of the Life Assured’s death, the beneficiary will get the Sum Assured subtracted by the amount of partial redemptions made.

3.      Investment Fund:

Fund name Asset classes invested in (as a % of overall fund portfolio)
Government / Government Guaranteed Securities / Corporate Debt Short-term investments (e.g. money market instruments) Listed equities/stocks
Samridhi Plus Fund 0-100% 0-100% 0-100%

Here are some basic details of the plan –

Policy at a glance Regular-premium pay Single-premium pay
Premium payment frequency Annual, half-yearly, quarterly or monthly Only when buying the policy
Entry Age (minimum – maximum) 8-65 years
Maturity Age (minimum – maximum) 18-70 years
Policy Term 10 years (fixed)
Premium Payment Term 5 years 1 year
Minimum Premium (in Rs.) 15,000 per annum for non-monthly mode 1,500 per month for monthly mode 30,000
Maximum Premium (in Rs.) 1,00,000 per annum No limit
Minimum Sum Assured (in Rs.) 10 times the annual premium (for entry age <45 years) 7 times the annual premium (for entry age >=45 years) 1.25 times the single premium (for entry age <45 years) 1.1 times the single premium (for entry age >=45 years)
Maximum Sum Assured (in Rs.) 20 times the premium per annum (for entry age <45 years) 10 times the premium per annum (for entry age >=45 years) 5 times the Single premium (if entry age <= 55 years) 1.25 times the Single premium (if entry age is between 56 and 65 years)

Other key characteristics of LIC Samridhi Plus unit linked insurance policy

1. Rider – As you might be aware, riders are extra components of an insurance policy that expand or restrict the benefits which are otherwise payable, thereby providing the policy owner a flexibility to amend the scope of his original policy’s coverage.

The LIC Samridhi Plus policy comes with a rider called the ‘Accident Benefit Option’. Made available only to those above 18 years of age, this rider makes it mandatory for LIC to pay an amount equalling the Sum Assured–subject to minimum of Rs. 25,000 and maximum of Rs. 50 lakh–in case of the policy owner dying due to an accident. This benefit will be awarded on top of the Sum Assured for the basic plan.

2. Surrender: After the lock-in period of five years, if the policyholder wants to surrender the policy, i.e. redeem/withdraw his invested premium, then he will get the Fund Value, as on the date of surrender.

In case of death of insured individual after the date of surrender but before the completion of 5 years from the date the policy bean, LIC will immediately pay the proceeds of the Discontinued Policy to his beneficiary or legal heir.

3. Partial Withdrawals: Assuming you have paid all due premiums, the LIC Samridhi Plus plan allows you to withdraw money partially only after completion of five policy years, subject to various conditions.

4. Increase/Decrease of Sum Assured: The policyholder can’t enhance or decrease his Sum Assured during the tenure of the policy.

Sample case for a healthy male life

For Regular Pay

Entry Age 30 years
Annual Premium (in Rs.) 20,000
Sum Assured (in Rs.) 2,00,000 (10 x Annual Premium)
Premium Payment Term 5 years
Policy Term 10 years
Projected Fund Value at Maturity (in Rs.) (based on returns @ 6% per annum) 1,27,671 (Net Yield: 3.92%)
Projected Fund Value at Maturity (in Rs.) (based on returns @ 10% per annum) 1,73,855 (Net Yield: 7.90%)
Death Benefit during the 1st year of the policy (in Rs.) 2,00,000 (Higher of Sum Assured and Fund Value, which in this case, is 18,974 or 19,702 – based on 6% and 10% returns, respectively)
Death Benefit during the 10th year of the policy (in Rs.) 2,00,000 (Higher of Sum Assured and Fund Value, which in this case, is 1,27,671 or 1,73,855– based on 6% and 10% returns, respectively)

For Single-Premium Pay

Entry Age 30 years
Annual Premium (in Rs.) 30,000
Sum Assured (in Rs.) 37,500 (1.25 x Single Premium)
Premium Payment Term 1 year
Policy Term 10 years
Projected Fund Value at Maturity (in Rs.) (based on returns @ 6% per annum) 39,780 (net yield: 3.47%)
Projected Fund Value at Maturity (in Rs.) (based on returns @ 10% per annum) 58,869 (net yield: 7.59%)
Death Benefit during the 1st year of the policy (in Rs.) 37,500 (Higher of Sum Assured and Fund Value, which in this case, is 29,926 or 31,063, based on 6% and 10% returns, respectively)
Death Benefit during the 10th year of the policy (in Rs.) 39,780 or 58,869 (based on 6% and 10% returns, respectively)–computed as higher of Sum Assured and Fund Value

NOTE: The LIC Samridhi Plus plan is available for sale only until 25th May 2011.

Similar Posts:

Tagged with: ,

Leave a Reply