Moneylife has often warned of the shortcomings of unit-linked insurance plans. The new unit-linked insurance scheme from LIC Nomura Mutual Fund is no better, even without considering its charges, due to poor scheme performance
LIC Nomura Mutual Fund is re-launching the insurance-linked tax saving scheme previously known as Dhanraksha-89 as LIC Nomura MF Unit Linked Insurance Scheme (LIC Nomura MF ULIS). Despite being in existence for more than a decade, the scheme has a corpus of under Rs150 crore. Just as with Unit-Linked Insurance Plans (ULIPs) sold by insurance companies, part of the premium you pay will be paid to Life Insurance Corporation of India for securing the life risk cover and the remainder will be converted into units of LIC Nomura MF ULIS at the prevailing price. How much would be charged for insurance? Moneylife contacted LIC Nomura MF to get details of the charges. The charges would be around Rs130 annually (Rs1 lakh insurance cover) for persons aged 18 years to 31 years. The amount is charged is depending on the investor’s age and term and mode of payment. But even though the charges are low, investors should take note of the scheme’s poor performance.
The asset allocation of the scheme is similar to balanced schemes, with 65%-80% invested in equity and the rest in debt securities. However, as with the other equity schemes of LIC Nomura MF, this one has also been a poor performer. The scheme has underperformed its benchmark in the one-year, three-year and five-year periods ending 14 January 2013. In fact, in the past 40 one-year quarterly rolling periods, the scheme was able to outperform the benchmark on just nine occasions. Such poor performance is prevalent in other equity schemes of LIC Nomura MF as well. Therefore, the tax you save by investing in this scheme may end up being much less than the amount you stand to lose from poor fund performance.
How does the scheme work? There are two plans—Single Premium and Regular Contribution. The amount of investment aggregated under each plan would be the target amount. For example, in the Single Premium plan, if you just invest Rs50,000, that becomes your target amount. In the Regular Contribution plan, if you invest Rs5,000 a year for 10 years, the target amount works out to Rs50,000 (Rs5,000x10).
Life insurance cover can be availed under two options as well—Uniform Cover, where the life insurance cover is equal to the target amount, and Reducing Cover, where the life insurance cover equals the remaining target amount. Under both, the maximum cover is Rs15 lakh. There is also be a free personal accident cover equal to life cover under both options, subject to a maximum of Rs7.5 lakh under all plans.
Other details of the scheme
Eligibility: Resident Indians and NRIs between the ages of 12 to 60 (age nearer birthday) years under the Single Premium option and the 10-year term of Regular Contribution option and 12 to 55 years for the 15-year term of the Regular Contribution option.
Regular Contribution Option -
1) Rs10,000 under the 10-year term
2) Rs15,000 under the 15-year term
Single Premium option: Rs10,000 and thereafter in multiples of Rs1,000 under both the 5- as well as the 10-year term
1) Rs15,00,000 under the Regular Contribution option
2) No maximum limit on the Single Premium option
Death benefit: In case of unfortunate death of the investor during the term period, the beneficiary will be entitled to
1. The corpus accumulated
2. Amount of life insurance cover
3. Amount of accident insurance cover in case death occurs due to accident
Maturity Benefit: On maturity of the scheme, the investor will get a bonus of 5% to 10% (depending on the term) of the target amount along with the accumulated corpus.
Maturity bonus will be paid subject to all renewal contribution in time.
Single Premium Plan: 5% of target amount for five-year term plan
10% of target amount for 10-year term plan
Regular Premium Plan: 10% of target amount for 10-year term plan
15% of target amount for 15-year term plan
However, if there is any default in payments, the maturity bonus will not be payable. On maturity the investor has the option to:
1. Continue in the scheme without insurance cover and exit at any time later on at the applicable NAV as on the date of receipt of redemption request.
2. Switch the maturity proceeds into any of LIC Nomura MF’s ongoing schemes.
3. Redeem the units as on the date of maturity.
Entry load: Nil
Exit load: Nil (three-year lock-in period)
Annual Scheme Recurring Expenses: Maximum 2.25%
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“Earlier while the banks used to give loans to entities with score of 600 out of 900 in the profile rating, now they mostly prefer a higher rating of around 800,” CIBIL managing director Arun Thukral said
New Delhi: Credit Information Bureau (CIBIL) on Wednesday said financial institutions are making more enquiries about credit profile of entities post the financial crisis, and about 20% of them are about auto loans, reports PTI.
“More than 20% of all enquiries made at CIBIL by credit institutions for assessing new loan applicants are for auto loans, with Delhi NCR contributing to over 34% of all auto loan enquiries (made in bigger cities),” CIBIL managing director Arun Thukral said.
He said after the 2008 financial crisis, banks have tightened their credit policies and have reduced their exposure specifically to unsecured debt like credit cards and personal loans.
The banks, Thukral said, are now more cautious in giving housing loans to customers with a lower credit rating.
“Earlier while the banks used to give loans to entities with score of 600 out of 900 in the CIBIL profile rating, now they are mostly preferring a higher rating of around 800,” Thukral said.
According to CIBIL data, the main drivers of credit growth post June quarter of 2009 has been in the secured loans segment like auto, two-wheeler and home loans.
The data also showed that auto loans have been on a rise in smaller cities in India over the past three years.
The smaller cities contribute to over 57% of all auto loan enquiries and have shown the highest growth in number of auto loan enquiries in last three years, CIBIL said.
It said that while overall number of auto loans disbursed is growing, the average loan size has also been on the rise since the past three years.
CIBIL, India's largest credit information bureau maintains credit information of more than 22 crore consumers and one lakh businesses. CIBIL score helps borrowers gauge their current financial position and improve their chances of acquiring a loan.