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A Ulip that not only insures death but also cancer

LiveMint logoLiveMint 08-08-2017 Deepti Bhaskaran

Bajaj Allianz Life Insurance Co. Ltd has launched a unit linked insurance plan called Future Wealth Gain, in which the insurance cover can also be claimed in case the insured person is diagnosed with cancer. A Ulip is a market-linked insurance plan that offers insurance and also invests your money in the markets. Read on to know out more about this plan.

From an insurance point of view, this is a type-1 Ulip: on death of the policyholder during the policy term, the insurers pay higher of the fund value or the insurance cover. But there are two insurance options to choose from in this case.

The first is the Wealth Plus variant, where if the policyholder dies during policy term, the policy will pay higher of the sum assured or the fund value—subject to a minimum payment of 105% of the premiums paid.

The second variant is called the Wealth Plus Care. It also pays the insurance amount on diagnosis of cancer, but the cancer cover comes with an initial waiting period of 6 months. Also, customers who are already diagnosed with cancer cannot buy this cover. Under this option, in case of death or diagnosis of cancer (read the brochure to know the severity of malignancy that’s insured), the policy will pay higher of the sum assured or the fund value subject to a minimum of 105% of the premiums paid. In addition to this payment, there is also an income benefit that pays the remaining premiums to the beneficiary as and when they are due during the remaining policy term.

“The idea of paying due premiums to the beneficiary is to make sure that there is periodic liquidity over and above the sum assured. Also, this way no charges are levied to the premium and the beneficiary is free to use the premium instalment anyway she likes,” said Rituraj Bhattacharya, associate vice president, product development, Bajaj Allianz Life.

“Also, this policy has greater insurance cover as the policyholder can choose a sum assured of up to 40 times the annual premium in the base variant and 12.5 times under the Care variant. The maximum multiplier however will depend on the age,” added Bhattacharya. In terms of investments, there are eight investment funds to choose from, in which six are equity funds and two are debt funds. You can invest in any of these funds or choose a life portfolio strategy that starts with an equity-heavy allocation and shifts your money to debt as you near maturity. In order to encourage you to stay longer the policy offers periodic loyalty additions starting from the 10th year, which gets added to the fund value and also a booster on maturity.

The premium that you pay gets invested in the funds of your choice and policy charges, including the cost of insurance, are met from the fund value. Premium allocation charge is deducted straight from the premium. In the first year, depending on the premium that you pay, this ranges from 0 to 8.5%.

For annual premiums of Rs99,999 or less, it is 8.5% and for an annual premiums of at least Rs3 lakh, it’s nil. By the third year the charge tapers to 6% for annual premium of Rs99,999 or less and remains constant till the fifth year and is nil thereafter. The fund management charge ranges from 0.95% for debt funds to 1.35% for equity funds. The policy administration charge, which is deducted from the fund value, is nil in the first 5 years and subsequently it is 2% of the annual premium to a maximum of Rs6,000.

Mortality charge will depend on factors such as age. For a 35-year-old male, the minimum sum assured with an annual premium of Rs1 lakh comes to Rs12.5 lakh. Assuming the policy term to be 25 years and the premium payment term 15 years, a Rs1 lakh investment per year in an equity fund that grows at 8% will return Rs46.7 lakh under the base variant. This is a net return of 6.31%.

In terms of costs, there are other cheaper plans in the market. However this plan offers the option to pay the sum assured on cancer and also bundles in income benefit even on account of cancer. But according to Suresh Sadagopan, a Mumbai-based financial planner, the benefit is not huge enough to recommend the product. “You can buy a term insurance policy with income benefit and also look at buying a critical illness policy that covers more number of ailments,” Sadagopan said.

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