What is it?
This is a non-participating traditional plan that returns the sum assured plus guaranteed addition either on death or on maturity.
What do you get?
Your annual premium will be calculated on the sum assured you choose. Depending upon the premium and the policy term of your choice, every year the policy will make a guaranteed addition to the sum assured that is payable on death or on maturity. For instance, for a premium of Rs.18,000-24,999 for a term of 15 years, the policy will offer 8% of the premium paid so far as guaranteed addition every year. For premium of Rs.25,000 and above, the guaranteed addition would be 9%. For a policy term of 20 years and for a premium of Rs.12,000-17,999, this guaranteed addition is 9% and for a premium of Rs.18,000 and above, it would be 10%.
On maturity, you will get the sum assured plus the guaranteed addition, but on death your beneficiary will get the guaranteed addition plus higher of the sum assured or 105% of all premiums paid till then.
The policy offers you a discount in the premium if you choose to pay a premium of at least Rs.1 lakh. The discount in premium is 3% if the policy term is 15 years and 5% for a policy term of 20 years. The discount comes in the form of higher sum assured for the same premium, therefore it does not change the base premium at which the guaranteed addition is calculated.
What it means for you?
The guaranteed addition to the sum assured is made on simple interest basis. For instance, for a sum assured of around Rs.2.35 lakh, a 35-year-old will have to pay a premium of Rs.20,000 per year for a term of 20 years. The guaranteed addition in this case would be 10% of the premium paid. So in the first year, the guaranteed addition would be Rs.2,000 (10% of Rs.20,000); in the second year, the guaranteed addition would be Rs.4,000 (10% of Rs.40,000) and so on. The maturity benefit in this plan would come to Rs.6.55 lakh (Rs.2.35 lakh of sum assured plus a total guaranteed addition of Rs.4.2 lakh). This translated into an annual return of 4.49%.
Mint Money take
This plan does not offer adequate insurance for the premium that you need to pay. Investment-wise also the returns on the policy are not much compared with products such as Public Provident Fund which is currently giving 8.8% per annum. The only visible advantage of this policy is the guaranteed return on your money over a period of 15-20 years. But at around 5%, you would be bringing home a negative real rate of return. In other words, the return on your money would be less than the rate of inflation.