This is a non-participating life insurance policy that guarantees periodic payments to the policyholder.
WHAT DO YOU GET?
This is a regular premium paying product that offers two policy terms: 6 years and 12 years. In terms of survival or maturity benefits, at the end of the policy term, you are guaranteed a monthly income for 10 years. In the last five years, you get twice the monthly income that you get in the first five years. Premium is calculated based on the monthly income you choose, and the calculations for both are mentioned in the brochure.
You can also opt for lump sum payout or guaranteed maturity sum assured instead. This will discount all the future payouts at 5.7%, and the plan will terminate.
In terms of insurance, the guaranteed sum assured payable on death is 12.75 times of annual premium if policy term is six years, and 18.5 times the annual premium for policy term of 12 years. The policy will pay the higher of 10 times the annual premium, 105% of the all the premiums paid, guaranteed maturity sum assured or guaranteed death sum assured. Your nominee can opt for a monthly payout of death benefits. For a six-year term, the payout will be 165% of annual premium divided by 12 and will be paid for 10 years after the death of the policyholder. For a term of 12 years, the monthly death benefit will be 240% of the annual premium divided by 12.
WHAT’S SPECIAL?
After the payout term of 10 years is over, the insurer will also pay a terminal bonus that’s equal to 125% of annual premium if policy term is six years, and 200% if policy term is 12 years. If you go for lump sum pay out, the policy will discount the benefit as well.
HOW DOES IT WORK?
Say, a 35-year-old male buys this policy for an annual premium of Rs.1 lakh and for a policy term of six years. He will be entitled to a monthly payment of Rs.4,455, or Rs.53,460 per annum, in the first five years, and Rs.8,910 per month or Rs.1.07 lakh per annum in the next five years, and a terminal benefit of Rs.1.25 lakh. This is a net return of around 4.56%. If he chooses a policy term of 12 years, he will be entitled to Rs.10,496 per month or around Rs.1.26 lakh per annum for the first five years and Rs.20,992 per month or Rs.2.52 lakh per annum in the subsequent five years. The terminal benefit will be Rs.2 lakh, and the net return will be of around 4.47%.
MINT MONEY TAKE
Our view is that such plans don’t enable comparison as net return is not disclosed even though guaranteed investment benefits are given upfront. Further, the insurance element in this plan is not enough, though it is more than what other products give (death benefit sum assured of 10 times the annual premium). In terms of investment, too, it gives a little over 4%. Many guaranteed insurance products give this. In the name of guarantee you could be bringing home sub-optimal returns. So, make sure you calculate the net return on investment, and compare with other products in the market.
