Good or Bad? A Detailed ULIP Review

Reliance Nippon Life Classic Plan II is a Unit-Linked, Non-Participating, Individual Life Insurance Plan.

Reliance Nippon Life Classic Plan II Plan allows you to diversify your savings with a choice of multiple funds that you can switch amongst to hedge against market risks. The plan also provides life insurance to ensure protection for your family.

• Ensure your family’s financial security with life insurance coverage throughout the Reliance Nippon Life Classic Plan II Plan policy term.
• Access partial withdrawals from your policy fund in case of emergencies.
• Receive the fund value at maturity, including any top-ups.
• Customize your premium payment terms to suit your needs.
• Select from a range of 8 diverse investment funds.

On survival of the Life Assured till the end of the Reliance Nippon Life Classic Plan II Plan Policy Term, total Fund Value which is the sum of the Base Fund Value and Top-up Fund Value, if any, will be payable.

In the unfortunate event of death of the Life Assured, while the Reliance Nippon Life Classic Plan II Plan Policy is in force we will pay the nominee, the highest of:

• Base Sum Assured net of all “Deductible Partial Withdrawals”, if any; and
• Base Fund Value; and
• 105% of the total premiums paid (excluding Top-up premiums) less “Deductible Partial Withdrawals”, if any

In addition to this, provided the policyholder has a Top-up Fund Value, the highest of:

• Top-up Sum Assured; and
• Top-up Fund Value; and
• 105% of the Top-up premium paid

The plan offers eight fund options at inception. Details of the funds are mentioned below

i.) Premium Allocation Charges

The Premium Allocation Charge as a percentage of the premium will be deducted from the premium amount at the time of premium payment and the balance premium will be used to allocate units in the chosen investment fund/s thereafter.

ii.) Policy Administration Charge

For regular premium policies, ₹ 40 per month from Year 6 till the end of the Reliance Nippon Life Classic Plan II Plan Policy Term. For a Single Premium Policy, ₹ 40 per month for the entire Policy Term.

The above charges will increase with inflation of 5% p.a. from the 7^th Policy year onwards, subject to a maximum of ₹ 6,000 p.a.

iii.) Mortality Charges

The Mortality Charges will vary depending on the amount of life insurance cover, attained age, occupation, health of the Life Assured and the Fund Value

iv.) Accidental Death Benefit (ADB) Charges

The annual charge for Accidental Death Benefit up to age 65 is ₹ 1 per 1000 Sum Assured and will be deducted on a monthly basis.

v.) Fund Management Charges (FMC)

vi.) Partial Withdrawal Charges

Two partial withdrawals in a Policy year are free. On every subsequent partial withdrawal, a charge of ₹ 100 will be deducted from the withdrawn fund.

vii.) Discontinuance Charges

The discontinuance charges depend on the year of discontinuance, premium amount, and premium paying term. There are no discontinuance charges from the 5^th policy year onwards.

viii.) Switching Charges

There are 52 free switches during any Reliance Nippon Life Classic Plan II Plan Policy year and 4 free switches per year during the settlement period. Subsequent switches if any will have a fixed charge of ₹ 100 per switch.

Unlike other market-related products, this plan imposes additional charges that, over time, can significantly reduce your overall returns.

For Regular/Limited Pay Policy

Grace Period

There is a grace period of 30 days from the due date for payment of the premium. In the case of monthly frequency, the grace period is 15 days.

Discontinuance

Discontinuance of Policy during the first five Policy years i.e. during the Lock-in Period: If the due premium has not been paid within the grace period, the total fund value after deducting the applicable discontinuance charges, shall be credited to the Discontinued Policy Fund and the risk cover and rider benefits (if any) shall cease.

At the end of the fifth Policy year, the proceeds of the discontinuance fund shall be paid to the policyholder and the Policy shall terminate

Discontinuance of Policy after the first five Policy years i.e. after the Lock-in Period: If due premium has not been paid within the grace period, the Policy shall be converted into a reduced paid-up Policy with the paid-up Sum Assured.

Revival

The policyholder may revive the Reliance Nippon Life Classic Plan II Plan policy within the Revival Period of three consecutive complete years from the date of the first unpaid premium.

In the event you disagree with any of the policy terms or conditions, or otherwise and have not made any claim, you shall have the option to return the policy within 30 days beginning from the date of receipt of the policy document, whether received electronically or otherwise.

For Regular/Limited Pay Policy

During Lock-in Period: You have the option to surrender the Policy anytime and you will be entitled to the Discontinued Policy Fund Value at the end of the fifth Policy year or the date of surrender whichever is later, and the Policy will be terminated

After Lock-in Period: The policyholder has the option to surrender the Policy anytime during the revival period and the fund value shall be payable and the Reliance Nippon Life Classic Plan II Plan Policy will terminate.

For Single Pay Policy

On surrender of the Policy during the first five Policy years, the Total Fund Value (i.e. Base Fund Value plus Top-up Fund Value), if any, after deduction of applicable Discontinuance Charge, shall be transferred to the Discontinued Policy Fund and risk cover and rider cover, if any, shall cease.

The proceeds from the Discontinued Policy Fund will be payable to you at the end of the fifth Policy year or on the date of surrender whichever is later.

On surrender after completion of the fifth Policy year, you will be entitled to the Fund Value including Top-up Fund Value, if any.

• Boost your investments with optional top-ups.
• Enjoy added security with accidental death coverage.
• Benefit from 52 free switches across 8 investment fund options.
• Adjust the investment allocation of future premiums using premium redirection.
• Leverage the Systematic Transfer Plan (STP) to mitigate equity market volatility.

• This plan does not provide a loan facility.
• Liquidity is limited during the initial five policy years.
• Premiums are invested after deducting applicable charges.

The Reliance Nippon Life Classic Plan II combines life insurance coverage with market-linked investment opportunities.

A detailed benefit illustration helps demonstrate how the ULIP works, offering insights into its potential returns. Evaluating the plan based on return percentages can support your decision-making process.

For instance, consider a 30-year-old male choosing the plan with a sum assured of ₹5 Lakhs, a policy term of 15 years, and a premium payment term of 15 years. He pays an annual premium of ₹50,000 and receives the fund value at maturity.

The fund value, based on assumed investment returns of 4% p.a. and 8% p.a., is calculated as follows:

At 4% p.a., the fund value at maturity is ₹8.43 Lakhs, resulting in an IRR of 1.45% as per the Reliance Nippon Life Classic Plan II Plan maturity calculator, which is lower than a typical savings account interest rate.

At 8% p.a., the fund value at maturity is ₹11.74 Lakhs, yielding an IRR of 5.42% as per the Reliance Nippon Life Classic Plan II Plan, which is less than the interest rate offered by fixed deposits.

Despite being a long-term investment, the plan fails to outperform inflation, making it unsuitable for achieving long-term financial goals.

Additionally, the plan offers limited liquidity and does not effectively contribute to wealth accumulation. Investing in the Reliance Nippon Life Classic Plan II may not be the best option for building a strong financial foundation.

In this section, we compare the returns of the Reliance Nippon Life Classic Plan II with other market-linked products to help you make an informed investment decision.

While the plan provides life insurance coverage and market-linked investment opportunities, an alternate approach of separating insurance and investment may yield better results.

Using the same assumptions as in the earlier illustration, a pure term life insurance policy with a sum assured of ₹5 Lakhs costs ₹2,100 annually for a 15-year term. This leaves ₹47,900 annually for investments, compared to the ₹50,000 premium paid under the Reliance Nippon Life Classic Plan II.

For investment, high-risk investors can opt for equity-based instruments like ELSS, while low-risk investors can choose debt instruments like PPF.

PPF Scenario (Low Risk)

Over 15 years, the maturity value of PPF is ₹12.99 Lakhs, with an IRR of 6.60%. Despite being a low-risk debt instrument, PPF offers comparable returns to the 8% scenario of the Reliance Nippon Life Classic Plan II.

ELSS Scenario (High Risk)

Investing the surplus in ELSS results in a pre-tax maturity value of ₹19.99 Lakhs. After capital gains tax, the post-tax maturity value is ₹18.55 Lakhs, with an IRR of 10.68%.

Both scenarios outperform the Reliance Nippon Life Classic Plan II, offering higher returns and greater flexibility.

The accumulated funds can be used to achieve various life goals. Reliance Nippon Life Classic Plan II lacks in terms of returns and liquidity, making it less competitive.

The Reliance Nippon Life Classic Plan II aims to address two key aspects: investing for life goals and providing financial protection for your family.

However, the insurance coverage (sum assured) offered under this plan is insufficient to meet your family’s future needs. Additionally, the premium charged for this coverage is significantly higher than that of a pure-term life insurance policy.

The excess premium is allocated to market-linked investments, with the maturity value paid to the policyholder.

However, a return analysis reveals that the potential returns are underwhelming for a long-term investment, primarily due to high charges and it also has a high agent commission.

If you are interested in market-linked investments, it is more effective to keep insurance and investments separate. This approach enables you to combat inflation and build wealth for your life goals.

When it comes to financial advice, are Quora, Facebook, and Twitter the final word?

A well-diversified investment portfolio combined with a term insurance policy for family protection ensures your financial plan stays on track. To create a personalized financial plan, consider consulting a Certified Financial Planner.