LIC Flexi Plus is a new ULIP launched by LIC this year, and this product gives you life cover and invests a part of your money in either a debt or mixed fund. The life cover is ten times your annual premium.
It used to be that ULIPs were ridiculously expensive but with changes in the last couple of years, their costs have come down and you can’t outright dismiss them these days.
However, they still have costs at multiple levels, and because this relatively low cost regime has not been in existence for very long, it is not possible to see how ULIP funds have really performed compared to equity or debt mutual funds after these changes. We will look at the costs later on in this post, but first let’s take a look at the key features of LIC Flexi Plus.
Insurance
The life insurance cover is ten times your annual premium, and they deduct mortality charges for that from your premium in order to account for the life cover expense.
Investment
You can choose to invest  your money in either a debt fund or a mixed fund. Here is some quick information about them from the LIC Flexi Plus page.
| Fund Type | Investment in Government / Government Guaranteed Securities / Corporate Debt | Short-term investments such as money market instruments | Investment in Listed Equity Shares | Details and objective of the fund for risk /return | SFIN No. |
|
Debt Fund  Mixed Fund |
Not less than 60% Not less than 45% |
Not more than 40% Not more than 40% |
Nil Not less than 15% & |
Low risk Steady Income –Lower to Medium risk |
ULIF00118 0912LICFLX+DBT512 ULIF00218 0912LICFLX+MIX512 |
Plan Payment Term
This is quite an important thing to look at in my opinion as the term is either 10 years or 20 years, and you are locked in to the ULIP for these many years. You can of course discontinue the fund but there is penalty in doing that, and you don’t want to invest here if you can’t pay the premium for the entire term.
The flip-side of this is you can’t exit out of it if the underlying funds don’t perform well.
LIC Flexi Plus Costs
The costs associated with LIC Flex Plus are as follows.
Premium Allocation Charge
These are charges that get deducted from your premium before the money is used for anything else. In the case of Flexi Plus, the premium allocation charges are as follows:
|
Premium |
Allocation Charge |
|
1st  Year |
7.50% |
|
2nd  to 5th  Year |
5.00% |
|
Thereafter |
3.00% |
Mortality Charge
The second charge is the mortality charge which is the insurance cost of the ULIP. The mortality charges are dependent on age, and the table below gives a snapshot of how these are charged.
| Age |
25 |
35 |
45 |
50 |
| Rs. |
1.36 |
1.66 |
3.73 |
6.29
|
Policy Administration Charges
The next cost related to this is policy administration charges, and they are charged per month as follows:
|
Policy Year |
Policy Admin Charge |
|
1 |
 Rs. 50 |
|
2 |
 Rs. 41.20 |
|
3 |
Rs. 42.44 |
|
4 |
 Rs. 43.71 |
|
5 |
 Rs. 45.02 |
|
6 and over |
Rs. 34.78 and increasing by 3% every year after that |
 Fund Management Charges
Since there are funds that will manage your money, this ULIP has to bear fund management charges as well, and those are as follows.
- 0.50% p.a. of unit fund for Debt Fund
- 0.60% p.a. of unit fund for Mixed Fund
The above were all the charges that I could find related to this fund, and while they are not as crazy as they used to be – it’s not very cheap either.
Conclusion
As you can see the LIC Flexi Plus is not exactly cheap, and in a way comes with a long lock in period which you can break after 5 years without a penalty, but before that you will have to pay a penalty called the discontinuation charge which is charged as follows:
| Where the policy is discontinued during the policy year | Discontinuance charges for the policies having annualized premium up to Rs. 25,000/- | Discontinuance charges for the policies having annualized premium above Rs. 25,000/- |
|
1 |
Lower of 15% * (AP or FV) subject to a maximum of Rs. 2500/- |
Lower of 6% * (AP or FV) subject to maximum of Rs. 6000/- |
|
2 |
Lower of 7.5% * (AP or FV) subject to a maximum of Rs. 1750/- |
Lower of 4% * (AP or FV) subject to maximum of Rs. 4000/- |
|
3 |
Lower of 5% * (AP or FV) subject to a maximum of Rs. 1250/- |
Lower of 3% * (AP or FV) subject to maximum of Rs. 3000/- |
|
4 |
Lower of 3% * (AP or FV) subject to a maximum of Rs. 750/- |
Lower of 2% * (AP or FV) subject to maximum of Rs. 2000/- |
|
5 and onwards |
NIL |
NIL
|
Given the role LIC has played in some of the PSU IPOs in the past, and all these other concerns about the product, I can’t find a good reason to invest in this. I would much rather invest in a balanced fund (Read: Best Balanced Funds in India) or simply a debt fund instead of this and buy insurance separately.
