ulipICICI Pru Signature is a new Unit Linked Insurance Policy from ICICI Prudential Life Insurance Company. Playing catch-up with other insurance firms that have launched similar products, ICICI Pru’s Signature ULIP also offers a return of mortality charges and policy administration charges, wealth booster facility and choice of different portfolio strategies. So, how different is this product from others? Should you consider buying it? RupeeIQ tells you.

ULIP benefit

The ICICI Pru Signature plan offers key benefits. But, before you go into them in detail, let us remind you that a ULIP is more of an investment than insurance. A lot of the premium that you pay goes into investment, while only a teeny-weeny portion goes into buying actual life insurance. We will illustrate with an example. Assume a 35-year old person buys ICICI Pru Signature with Rs 1 lakh premium for 5 years premium paying term. So, an annual premium of Rs 1 lakh will ensure Rs 10 lakh life insurance sum assured. Why Rs 1 lakh premium for Rs 10 lakh cover? This is because, in all ULIPs, the actual insurance component is quite small. In a term insurance plan, Rs 1 lakh annual premium will fetch a 35-year old person Rs 12 crore life cover!

So, ULIP is more of an investment than insurance. To make the insurance part more attractive, life insurers have been adding different facilities and benefits. There are different portfolio strategies through which you can give your wealth creation a boost. The biggest advantage that ULIPs have are that the maturity corpus is entirely tax-free. An investment product like equity or hybrid mutual fund is not completely tax-free because of the imposition of 10% Long Term Capital Gain (LTCG) tax on equity investments. This means if post-expenses investment returns are the same, a ULIP is more tax-efficient than a mutual fund.

In this policy, the investment risk in the investment portfolio is borne by the policyholder. Unit linked insurance products do not offer any liquidity during the first five years of the contract. The policyholder will not be able to surrender/withdraw the monies invested in unit linked insurance products completely or partially till the end of the fifth year.

Mortality charge and return

Now, let us come to specific benefits of ICICI Pru Signature.

Firstly, the plan says it will return mortality charges (for policies other than whole life option). How much is the mortality charge? Mortality charges are levied every month by the redemption of units based on the Sum at Risk. The Sum at Risk is highest of, either

• Sum Assured, including Top-up Sum Assured, if any,

• Fund Value (including Top-up Fund Value, if any),

• Minimum Death Benefit

• Fund Value (including Top-up Fund Value, if any).

Typically, ICICI Pru’s annual mortality charges are 1.06/1.02 for 30-year old male/female per thousand life cover. So, if you have taken Rs 10 lakh life cover, then the 30-year person will be paying Rs 1060/1020 depending on gender. As your age increases, the mortality charge rises. At 40 years of age, the mortality charge for Rs 10 lakh life cover will be Rs 1810/1550. At 60 years of age, the charge will be Rs 11540/9950 per annum.

Returning mortality charge to a policyholder who is alive is a good business practice. If the life insurance was not required, then all companies should return the cost of insurance i.e. mortality charge.

ICICI Pru is not the only life insurance company that returns mortality charges. Bajaj Allianz Life, Edelweiss Tokio Life, HDFC Life and Canara HSBC OBC Life also have ULIPs that do the same.

Additional Read: ULIP review: IDBI Federal ‘Smart Growth Plan’, what is on offer?

Policy administration charge and return

Secondly, ICICI Pru Signature promises to return Policy Administration Charges (PAC) at maturity. Like the mortality charge, PAC will also be added back to your fund value. How much is PAC? ICIC Pru charges PAC every month by the redemption of units. PAC is Rs 100 per month or Rs 1,200 annually. It is charged throughout the policy term. So, if you take a policy term of 20 years, you would have paid Rs 24,000. For a policy term of 15 years, you would have paid Rs 18,000. This money will be returned by ICICI Pru Signature at policy maturity.

ICICI Pru Signature is not the only product that returns policy administration. For instance, HDFC Life’s ‘Click 2 Invest’ and Edelweiss-Tokio ‘Wealth Plus’ do not have any PAC i.e. zero PAC. But not everybody has zero PAC or returns PAC. For instance, Bajaj Allianz Life Goal Assure ULIP charges PAC at Rs 400 per annum inflating at 5% per annum, subject to a maximum of Rs 6,000 in any year. IDBI Federal Smart Growth Plan ULIP charges 1.25-3.60% of annual premium per year (subject to Rs 6,000 per year maximum) as PAC depending on the policy year. Over a 15-20 year policy term, PAC could eat away Rs 90,000-120,000 over the period.

Additional Read: ULIP Review: Edelweiss Tokio Wealth Plus, a relatively low-cost ULIP

Wealth boosters

ICICI Pru Signature ULIP offers wealth boosters. This will be done by contributing extra units to your policy at the end of every 5th policy year starting from the end of 10th policy year till the end of your policy term. Each wealth booster will be equal to 3.25% of the average of the fund values including Top-up fund Value, if any, on the last business day of the last eight policy quarters. The allocation of wealth boosters is guaranteed.

ICICI Pru Signature’s wealth boosters are attractive because of the 3.25% amount. Other competing ULIP products offer similar benefits by giving loyalty additions. Max Life Platinum Wealth Plan gives this. On Edelweiss-Tokio Wealth Plus, you can get extra allocation (1% of annualised premium added between policy year 1 to 5), premium booster (3% to 7% from 6th year onwards).

ICICI Pru Signature ULIP

Key details of ICICI Pru Signature

Minimum premium – For policies other than Whole Life: Rs 30,000 p.a. For Whole Life option: Rs 60,000 p.a.

Policy term – 10- 30 years; For Whole Life policy term option, policy term will be equal to 99 minus age at entry

Age at entry – Minimum entry age: 0 years Maximum entry age: 60 years; For minor lives, life cover commences from the date of inception of the policy. In case of minor life assured, the policy does not vest in the name of the life assured when he/she turns major during the policy term.

Additional Read: ULIP Review: Bajaj Allianz Life Goal Assure offers four portfolio strategies

RupeeIQ take – ICICI Pru Signature is a savings and protection oriented unit-linked insurance plan. This is a cost-efficient ULIP given the features and benefits. From a ULIP perspective, the investment return is a big thing. Why? Because life cover in ULIP is small, and so it is not really for life insurance purpose. The investment return you will experience depends on various charges, and the investment performance. There is no premium allocation charge. Mortality charge and policy administration charge are returned at maturity. ICICI Pru Signature’s fund management charge ranges from 0.75% to 1.35%, which is competitive compared to others.

The investment performance depends on what kind of portfolio strategy and how the chosen portfolio does over the long-term. This ULIP offers you 4 strategies namely, Target Asset Allocation Strategy, Trigger Portfolio Strategy 2, Fixed Portfolio Strategy and Lifecycle based Portfolio Strategy 2. As a domestic investment manager, ICICI Pru Life is one of the best. So, it all boils down to how your chosen investment strategy and funds will perform.

Disclaimer: The article is only for informational purposes. Investors are requested to consult their financial, tax and other advisors before taking any investment decision.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at kumarsroy@rupeeiq.com.