LIC's Flexiplus: Appealing to risk-averse, but charges high

MUMBAI: The first three months of a calendar year usually witness hectic activity in the life insurance sector. This is the period when life insurers launch products to attract individuals looking to make tax-related investments before March 31.

The country's largest life insurer Life Insurance Corporation of India ( LIC) has kicked off the annual ritual this year by launching two new products, one of them being a unit-linked insurance plan. Named Flexiplus, the Ulip offers two fund options - Debt and Mixed. While the former will invest in fixed income avenues like government securities, corporate debt and money market instruments, mixed fund will offer exposure to equities.

However, the equity component in the product will not exceed 25%, which means that its returns will be capped. You need to bear this limitation in mind if wealth creation is your objective, since financial planners consider equity to be the best performing asset class over the long term.

The premium allocation charge will be 7.5% in the first year, 5% for the next four years and sixth year onwards, it will go down to 3%. However, the policy administration charge will start increasing at the rate 3% per annum from the sixth year.

Upside: If you are a risk-averse investor looking for an insurance-cum-investment plan with some equity exposure, you might find FlexiPlus appealing

Downside: Financial planners say the charges, particularly policy administration fee, are high. Sixth year onwards, policy administration charges increase at a rate of 3% per annum.