Name of the plan
HDFC Standard Life’s Endowment Gain Insurance Plan.
What is it
Since it comes under the category of traditional plans, it does not have a transparent investment portfolio. Also, like other traditional insurance-cum-investment plans, the plan invests largely in debt.
What you get
This plan would return the sum assured that you choose on death or on maturity. In addition, it will also give a reversionary bonus at the end of each fiscal year. This bonus would be a percentage of the sum assured; once declared, it will become guaranteed. This policy also offers a terminal or end of the policy bonus, which is declared at the end of the policy term. However, it will be given solely at the discretion of the insurer.
This policy encourages you to take a higher sum assured as it offers a discount on higher sums assured. Premiums are discounted by 5% if you choose a sum assured of Rs5 lakh or more.
Since it is a traditional plan, investment and costs are not disclosed. So you wouldn’t know where is the money invested and what has been the fund’s performance. The only cost mentioned in the brochure is the policy fee that ranges between 25 and 200.
Watch out for
The grace period given under this policy—in case you miss the premium paying deadline—is only 15 days. If you stop paying premiums during the initial three years and your policy lapses, the company is not liable to pay back any money. However, if you skip paying premium after completing three years, then your policy does not lapse but the sum assured is reduced. The company does not pay any further bonuses either.
Mint money take
Since it is an insurance-cum-investment plan, let’s look at it from both angles.
Insurance: For a 30-year-old wanting a sum assured of Rs10 lakh for, say, 20 years, the annual premium would be Rs46,931. A term plan for the same sum assured over the same period would come for about Rs4,000. If you are looking to buy this policy for your insurance needs, you can give it a skip and trust on term instead.
Investment:Going by basic calculation, if you pay Rs46,931 for 20 years and get Rs10 lakh on maturity, your return is only 0.66%. To get the real picture, we took the bonus rates on HDFC Standard Life’s other endowment plans. The bonus rates range between 2.25% and 3.25%. Assuming the best case scenario where you get a bonus of 3.25% of the sum assured every year, your net return would be around 5.58%. You will do better in a Public Provident Fund.