BackProduct crack: Bajaj Allianz Cash Assure
This is a traditional participating insurance policy, and it pegs investment returns to the performance of the participating fund
Premium
This is a traditional participating insurance policy, and it pegs investment returns to the performance of the participating fund.
WHAT DO YOU GET?
It has four policy terms that one can choose from: 16, 20, 24 and 28 years. Premium payment term for each is policy term minus five. So, for a policy term of 16 years, you will pay an annual premium for 11 years. Depending on the sum assured chosen, your age, gender and policy term, an annual premium will be calculated.
In terms of investment benefits, this works like a money-back plan. It will return a certain percentage of the sum assured at periodic intervals. So, if you choose a policy term of 16 years, you will get 15% of the sum assured at the end of the 4th, 8th and 12th year—total of 45%. On maturity, i.e., after the 16th year, you will get 60% of the sum assured with vested bonuses. If you choose a maximum policy term of 28 years, you will get 30% of the sum assured at the end of the 7th, 14th and 21st year (total of 90%), and on maturity you will get 60% of the sum assured with bonuses.
Every year, depending on the participating fund’s performance, a bonus is declared, which is a percentage of the sum assured. Once declared, it becomes guaranteed to be paid on maturity. The bonus is calculated on a compounded basis. On maturity, terminal bonus might be paid as well. For longer tenors, you get more than the sum assured as guaranteed benefit; but the difference may not be much when you factor in time value of money and inflation.
In terms of insurance, if the policyholder dies during the policy term, death benefit to the beneficiary will be higher of—10 times annual premium or sum assured chosen. The beneficiary will also get all the accrued bonus. The total death benefit can’t be less than 105% of all premiums paid.
WHAT IS SPECIAL?
There is a discount on premiums if you choose a higher sum assured. For every 1,000 of extra sum assured above sum assured of 1 lakh, a premium discount of 4.50 will be given. Also, premium for women policyholders will be based on premium rate for men policyholders who are three years younger.
HOW DOES IT WORK?
If a 30-year-old man takes this policy for a term of 28 years with a sum assured of 4 lakh, annual premium for 23 years will be 25,186. He will receive three money-back instalments at the end of 7th, 14th and 21st years; each of 1.2 lakh. On maturity, assuming the participating fund grows 8% a year, he will get a total of around 5.86 lakh—net return of 4.47%. Assuming it grows at 4%, net return would be just 1.43%. However, depending on additional bonuses at the discretion of the company, net returns may improve.
MINT MONEY TAKE
It is better to avoid traditional policies because these plans are opaque, and the insurance component is weak. Added to this, the returns, depending on the insurer, ranges between 3% and 6%. You would be better off buying a pure term plan and investing in other debt products such as the Public Provident Fund.
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