Public sector life insurance giant Life Insurance Corporation of India (LIC) will be launching a product similar to the unit-linked insurance policy of the Unit Trust of India (UTI) - ULIP.
Further, in a bid to reap the benefit of the product on which it had only been providing cover for so long, LIC has taken this decision. Once the LICI version of ULIP, which will be launched in two months, LIC might dissociate itself from UTI.
LIC has already launched an equity-linked policy christened Bima Plus, but it did not have any unit-linked policy of its own although it had a tax saving mutual fund -- Dhanraksha. Now that the market for insurance products are hotting up, LIC is considering this new product.
LIC has been selling Dhanaraksha for quite sometime now, but market survey conducted on mutual funds reflected that ULIP has outperformed the former. The survey that compared the returns on both the schemes, showed that an investment of Rs 40,000 in ULIP has appreciated to Rs 77,180 in 10 years -- a Rs 37,180 earning for the investor.
At the same time, an investment of Rs 30,000 in Dhanraksha scheme for a similar period appreciated to Rs 55,000. Further, Dhanraksha in the last 10 years has maintained a dividend of 9.75 per cent, while ULIP has maintained a repurchase price of around 13.50-14.50 per cent.
ULIP is a tax saving scheme from UTI, that was converted into an open-ended tax saving-cum-insurance plan based on net asset value a few months back. The tenure of the scheme is either 10 years or 15 years with the minimum target amount at Rs 15,000 or Rs 75,000.
The life insurance cover under the scheme is up to the target amount and accident insurance has been increased to Rs 50,000 (Rs 30,000), irrespective of the target amount. Life insurance cover for female investors with no regular and independent income was Rs 40,000.
On maturity, there is a bonus of five per cent of the target amount for a 10-year plan and a 7.5 per cent bonus for a 15-year plan. A unit holder can continue beyond the 10-15 year period and will be entitled to accident insurance cover and a bonus of 0.5 per cent for every completed year.
