It is a single-premium unit-linked insurance plan (Ulip) that promises a maturity corpus of at least twice the premium paid. It also provides an insurance cover during the term.
The minimum premium under this plan is Rs 5,000, which is also the cost of one guaranteed maturity certificate. Under the plan, you make investments by buying these certificates. You can buy any number of guaranteed maturity certificates at inception. These certificates invest your money in the guaranteed bond fund, which is mainly a debt fund with no exposure to equities.
|Minimum Entry Age||8 years|
|Maximum Entry Age||50 years|
|Minimum Age at Maturity||18 years|
|Maximum Age at Maturity||60 years|
|Policy Term||10 years|
|Minimum Premium||Rs. 5000|
|Minimum/Maximum Sum Assured||The Sum Assured under the product will be 5 times of the Single Premium for the first policy year.
For subsequent years, will reduce to 1.25 times of the Single premium for age-at-entry less than 45 years and 1.10 times of the Single premium for age-at-entry 45 years & above.
At maturity, you get the higher of:
- The guaranteed maturity value of all the Guaranteed Maturity Certificates held, as on the date of maturity or
- The total fund value as of the date of maturity.
In case of death of the life assured during the policy term: The death benefit payable would be the higher of:
- Prevailing Sum Assured reduced by the value of the units withdrawn through partial withdrawals from fund value in the last 24 months prior to the date of death or
- The fund value as on the date of receipt of intimation of death at the Company’s office.
- The policy will terminate on the death of the life assured
- You have the option to surrender the whole policy anytime from the 6th (sixth) policy year. The surrender value payable will be the fund value under the policy at the prevailing unit price as on the date of surrender.
- No guarantee is applicable on surrender of the policy.
How good is it?
The insurance element in the policy is minimal, so it is not for those looking for an insurance product. Whether the policy is good as an investment can be assessed by looking at the guaranteed benefits and the charges.
The plan offers to double your money at the end of the policy term. Considering the term is fixed at 10 years, the guaranteed return on your money will be around 7%.
The charges in the policy will determine the impact of cost on the final yields of the policy.
- The premium allocation charge, which is a straight deduction from the premium, is nil.
- The policy administration charge is 1.85% of the single premium in the first five years, after which it reduces to 0.70%, However, this charge can’t exceed Rs6,000 per annum.
- The fund management charge is 1% of the fund value per annum.
- Assuming the fund grows at 6% and 10%, Rs. 1 lakh invested by a 35-year-old will yield effective rates of 3.39% and 7.48%, respectively. In other words, the cost is about 2.5-2.6 percentage points.
The minimum or the guaranteed return under the policy is around 7%. If you are in the lower tax bracket of 10% and 20%, you would be better off by investing in fixed deposits considering that FDs of five years and above are giving around10% currently.
For higher tax bracket you must keep in mind that guaranteed return of the policy holds true only if you hold it for 10 Years i.e. till the end of policy. In case of bank Fixed deposit you get guaranteed return at the end of 5 years.
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