A Ulip with an all-equity option

The Life Maker Premium Investment Plan is a new offering from Max NewYork Life Insurance Company. For the first time for the company, a Max unit-linked insurance plan (Ulip) is giving the policyholder the option of investing his entire fund in equity, bringing the company at par with others.

Features: The age of entry is from 91 days to 65 years, while the maximum age at maturity age is 75 years. The minimum annual premium is Rs 20,000. You can pay premiums regularly for the entire period of the policy. Alternatively, if your policy term is between 10 and 30 years, you have the option to pay premiums for just half the term of the policy.

LMPIP also offers two riders-dread disease and personal accident benefit-that you can attached

either at the inception of the policy or at any of its 'anniversaries'.

Quick facts

• 100% in equity through Growth super Fund
• 25% surrender charge before 4 premiums are paid
• 0 charge for first six partial withdrawals
• 75 years maximum coverage age available      

Coverage: The life cover that you can get under this policy is determined by multiplying the premium-to-sum assured multiple. The minimum multiple is half of the policy term in years, say, five for a 10-year policy. Five is the lowest it will go. The maximum multiple is equal to the policy term. So, if the annual premium is Rs 50,000 for a 20-year policy, the maximum cover possible is Rs 10 lakh (Rs 1 million).

If you take a cover that is less than the maximum allowed, you can increase it later by keeping your premium unchanged. This helps if you find your liabilities increased because of, say, an addition to the family or the purchase of a house. Death benefit is higher of the sum assured or fund value. If you survive the policy term, you get the fund value.

Fund options: The investible part of the premium can go into five types of funds: from Growth Super (70-100 per cent in equities) to Growth, Balanced, Conservative and Secure (50-100 per cent in debt). Growth Super fund is a new

fund that can go up to 100 per cent in equities. Six free switches among the options are allowed every year. After that, each switch will cost Rs 500.

Loyalty additions: You will get your reward if you stay invested for the long term. This plan adds units to your fund, starting the ninth policy anniversary and then on every third year. The additions will be equal to 0.75 per cent of

the average of your fund values on the immediately preceding 36 months.

Costs. The front-end cost of the LMPIP, called the premium allocation charge, depends on your premium amount and the policy year to which the premium pertains. For premiums between Rs 20,000 and Rs 49,000, the first-year charge

is 25 per cent. It keeps falling with the premium amount and, for annual premiums over Rs 500,000, it is 21 per cent. In the second and third year, the charge is 10 and 5 per cent respectively, irrespective of the amount. From the fourth year onwards, the charge is 2 per cent for all amounts.

So, over the first 10 years, the total will be 53 per cent of one year's premium. That is competitive with other Ulips.

The annual fund management charge is 1.35 per cent of the fund value for the Growth Super Fund. Mortality charges, deducted every month, are based on the sum at risk (the difference of sum assured and fund value).

Plans that ask for lower front-end costs have started covering the gap under a different head-policy administration charge. Instead of keeping the cost under this as a fixed amount, LMPIP charges PAC between 9.5 per cent and 12 per cent of the premium amount from the first to third year and this deduction is done from the value of the fund. The charge from the fourth year is relatively lower.

Portfolio and performance: The portfolio gets published every quarter. The report for April-June says that on 31 March 2007, the growth fund had a well-diversified portfolio with about 30.59 per cent invested in four

sectors-IT, banking, telecom and capital goods. 

What to do: While Outloook Money prefers Ulips that give both fund value and sum assured as death benefit, LMPIP was worth examining since it is the only Ulip from Max that has the option of investing all your money in equity and

giving you somewhat higher fund value growth.

For returns we have considered the returns of the Growth fund option as it has been in existence for over two years. Make sure to keep invested if you own such a plan to ensure wealth creation over the long term.