That systematic investment plans (SIPs) in mutual funds are all the rage among investors is well recorded over the past several years. Many insurance companies have also started replicating the theme with SIP offerings in their ULIPs (unit linked insurance plans).
With multiple fund options across equity, debt and hybrid categories, the features appear quite similar to mutual funds.
In this regard, ICICI Prudential Life has rolled out a new Smart Insurance Plan Plus policy. It is a ULIP with a SIP+ smart insurance plan option, targeted at relatively young investors with an eye on riding the frenzy around mutual funds.
With lower or no costs associated under some heads, multiple fund and strategy choices for investors, systematic withdrawal options and so on, on offer with the new ULIP, it is important to understand some key aspects before opting for such a policy.
Decoding the ULIP
At a basic level, policyholders pay a premium periodically – monthly, half-yearly and annually – and the portion (after charges are deducted) goes into specific funds that an investor chooses from the options available. Upon surviving till maturity, the fund value is paid to the policyholder.
Smart Insurance Plan Plus comes in two variants. The wealth option has minimum/maximum premium payment terms of 5 years/15 years and a policy term of ‘75 minus age at entry’. The minimum premium is ₹12,000 per annum for those aged 35 or less and ₹1.2 lakh a year for those above 35. The maximum age at maturity is 75.
In the assure variant, the minimum premium payment term is 5 years (age<=35)/6 years (age >35) and the maximum premium term is 15 years. The minimum premium is ₹12,000 per annum. The maximum age at maturity if 60.
You are allowed to top-up (increase) your premiums. The sum assured is usually 10 times the annualised premium.
There are 25 fund options spread across equity, fixed income and hybrid categories. Each has multiple funds based on market cap and other criteria.
Four options – fixed portfolio, target asset allocation, trigger portfolio strategy 2 (75:25 equity-debt) and lifecycle-based portfolio strategy 2 – are available for investors.
The latter two options allow you to invest only in multi-cap growth and income funds.
The target asset allocation strategy allows you to decide allocation between any two funds and the proportion is maintained throughout the policy term.
The fixed portfolio strategy allows you to invest across many fund options and allows unlimited switching between funds without charges.
You can move in and out of strategies during the policy term.
Where the ULIP scores is on charges. There are no policy administration and premium allocation charges levied on the policy.
Only a fund management fee of 1.35 per cent is charged to Smart Insurance Plan Plus investors. There would also be mortality charges.
The minimum lock-in period is five years.
There are multiple withdrawal options. You can withdraw amounts from your fund value after the lock-in period partially. Systematic withdrawals – similar to how they work in mutual funds – are also allowed.
How ICICI Pru Life’s funds fared
When we speak about the return from any ULIP, it essentially comes from the underlying fund in which a policyholder has chosen to invest in.
Data from Morningstar on ULIP performances (as of July 3) across insurance companies give an indication.
We have taken those funds from ICICI Pru Life that are rated 3, 4 or 5-star. Out of a total of 83 funds available, 61 (nearly 75 per cent) are rated 3, 4 or 5-star.
The top 10-15 funds have given 20-22 per cent annualised returns over the past five years. Over a 10-year period, the annualised returns have been 11-12 per cent.
For perspective, top mutual funds have given 25-35 per cent returns over the past five years and 15-20 per cent returns over the past 10 years.
From the ICICI Pru Life stable, Maximiser V, Value Enhancer, Maximise India and Multi Cap Balanced are funds that have delivered well over the past five years.
Of course, these are just fund returns. For ULIP policyholders investing in these funds, the net returns would be lower due to mortality charges mentioned earlier.
Should investors opt for it?
Keeping insurance and investment separate is a key tenet of healthy financial planning for the long term.
For covering risk, a term insurance policy with sum assured that factors in the total income at risk by including all financial goals is enough. For investments, especially in the case of the young, mutual funds are ideal for saving towards all life goals.
However, ICICI Pru Smart Insurance Plan Plus has some interesting features such as no policy allocation and administration charges. Switching between funds is also allowed without charges. If you manage to have a surplus after exhausting all your regular investment options (mutual funds, bonds, FDs etc.), you can consider parking tiny sums in the ULIP, if you like the minimum five-year lock-in. You must have separate term and medical policies, and must not depend on the ULIP for risk cover.
Published on July 5, 2025
