- May 2014
- December 2013
Ruby Jacob, 02 Jan 2013
LIC added two more unfriendly products to its offerings yesterday. One is a unit-linked plan named Flexi Plus and the other a pension plan named New Jeevan Nidhi. As usual there is not much new in these plans except for their names (not even the names actually!).
LIC's Flexi Plus and New Jeevan Nidhi
Flexi Plus is projected to look more like an investment product than an insurance plan. It gives buyers two fund options to choose from-debt and mixed. On death during policy term the nominee gets sum assured in full. Remaining premiums payable are credited to the policyholder's account at that day's NAV. On maturity date the amount so created is paid out to the nominee. Instead if the policyholder survives the entire term he'd be paid his fund's value on maturity date.
New Jeevan Nidhi is a replica of the existing Jeevan Nidhi policy. On death of policyholder during premium payment term the nominee is paid sum assured and guaranteed additions (no big deal, just Rs 50 per Rs 1000) and vested bonuses, if any. Death benefit is paid lumpsum or in the form of an annuity or a combination of these both. Instead if she survives the accrued amount can be used in part or full to purchase an annuity product from LIC. The premiums are invested only in debt products.
Why these plans are not good for you
Investment plus insurance plans are a poor mix. Even though some of the funds in these conventional plans or ulips might succeed giving returns comparable to core debt or equity products, say bonds or mutual funds, the returns you actually earn from these ulips or pension plans would never be close to the core products. Blame it on high charges charged by insurance companies. Lest you find out what's going on and withdraw from the policies they keep the charges as well as the returns undisclosed.
And no, we'd rather not talk about the insurance cover provided by these products; it's peanuts compared to what good life insurance policies offer for similar premium rates.
Why so many new life insurance products?
Insurance companies are going the way of some mutual fund companies by launching similar products differing only in their name or some minor features. This is part of their effort to attract uninformed buyers and enlarge their market share. Very few buyers have the knowledge to judge products.
What you should do
The key is to keep things simple. So if you are looking for a good insurance plan, go choose a term plan. For investments needs stick to the core investment products. Both are best dealt with separately.