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An insurance that can work like a child plan

LiveMint logoLiveMint 16-08-2017 Deepti Bhaskaran

Future Generali’s New Assure Plus is a traditional insurance-cum-investment policy by Future Generali India Life Insurance Co. Ltd, where investment benefits are linked to performance of the participating fund. It offers two options, one of which works like a child plan. 

You start by choosing a sum assured, which is the guaranteed money that you get on maturity or on death. Depending on factors like your age and policy term, the policy will calculate the annual premium that you need to pay. In terms of insurance, there are two death benefit options to choose from. The first is structured like a basic endowment policy, so on death of the policyholder the beneficiary gets the insurance money and the policy terminates. Death benefit in this case is higher of the sum assured or 10 times the annual premiums paid plus all the bonuses accrued in the policy, subject to a minimum payment of 105% of all the premiums paid. 

If the policyholder survives the policy term, then on maturity, sum assured plus all the accrued bonuses are paid out. Being a participating plan, the investment benefits in the plan are pegged to the performance of the participating fund. This comes to you in the form of annual bonuses and is declared as a percentage of the sum assured. Once declared, the bonuses become part of the sum assured and are payable on death or on maturity. 

Under the second option, if the policyholder dies during the policy term, the death benefit will be higher of the sum assured or 10 times the annual premium or 105% of the premiums paid till date. The policy doesn’t terminate at this point. It continues till the end of the policy term and the bonuses continue to accrue. “The second option has an in-built waiver of premium cover. So on death of the policyholder, we pay the remaining premiums on its due date and the policy continues to get the annual bonus, which is then paid to the beneficiary on maturity,” said Rakesh Wadhwa, chief marketing officer and executive vice president-strategy and retail assurance, Future Generali Life. On maturity, the beneficiary will get the sum assured plus all the accrued bonuses. “It works like a child plan that individuals can take to invest for their kids’ future. The plan basically ensures that even death doesn’t interrupt the financial goal,” added Wadhwa. 

Suppose a 35-year-old buys this plan with a sum assured of Rs10 lakh for a policy term of 25 years, with a regular premium option. The annual premium in this case will come to Rs45,630 excluding the tax. Assuming the participating fund grows at 8%, the corpus available to you at the end of 25 years will be about Rs23.63 lakh. This is a net return of 5.22%. In option two, which comes with in-built waiver of premium, the annual premium comes to Rs53,130. This is because it’s a limited PPT and in this case, for a policy term of 25 years, the PPT is 20 years. At a 8% growth, the net return comes to 5.02%. 

In terms of costs, there are cheaper plans in the market. In terms of insurance, this plan is expensive too; you could consider a term plan that will get you a much higher insurance cover for much less. “The biggest challenge with traditional bundled insurance products is that the returns are low compared to other investment products in the market. Typically bundling insurance and investment reduces the performance of the product as the expenses are far higher. Also, there is no transparency on the portfolio,” said Deepali Sen, founder and director, Srujan Financial Advisers LLP. “Individuals are better-off buying a term policy and investing in debt products like the Public Provident Fund (PPF) for some sort of guaranteed return. You can also consider a debt mutual fund for your debt portfolio,” she added.

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