Product crack: Aviva Family Income Builder

You need to pay premium for twelve years in this plan.
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First Published: Tue, Aug 21 2012. 10 15 PM IST
What it is
It is a non-participating money-back insurance policy by Aviva Life Insurance Co. India Ltd that guarantees benefits upfront. You need to pay premiums for a specified number of years and the policy returns double the premium every year for the same number of years subsequently.
What you get
You need to pay premium for twelve years in this plan. From the 13th year, you will get double the premium you have paid for each year for the next twelve years. The same benefits are guaranteed to the beneficiary of the policyholder in case of death of the policyholder. So if a policyholder dies after paying two annualized premium instalments or in the second year, the beneficiary will get double the premiums paid from the 13th policy year.
Watch out for
However, if the policyholder dies in the first year itself then the beneficiary will get an annual payment equal to the premium from the 13th year.
Is it good?
As investment: From an investment point of view, this policy does not cut much ice. For example, if you invest Rs.1 lakh every year for twelve years you will get Rs.2 lakh every year for the next 12 years. A quick returns calculation shows that you get around 6%.
As insurance: Even as insurance, this policy does not do much. For an annual premium of Rs.1 lakh you get a collective sum assured of Rs.24 lakh staggered over 12 years. But a check on term plan from the same company shows that you can buy a term plan with a sum assured of Rs.25 lakh for anywhere between Rs.3,413 and Rs.6,255 if you are between 30 and 40 years of age.
Also keep in mind that this policy will not come to your rescue immediately in case of death of the policyholder. The beneficiary of this policy will have to wait at least till the end of the premium payment term to get the insurance money. In other words, the insurance benefits step in later in the policy period so the beneficiary must have the financial wherewithal to fend for himself in the interim.
Mint Money take
The only visible advantage of this plan is that it staggers the payment annually and guarantees the payment. So for someone looking for a guaranteed periodic income, the design of this policy may be appealing but you pay a cost for this guarantee. Even if we bundle the two benefits—insurance and investment—the product fails on the two litmus tests of adequate insurance for the premium being paid and returns on investment. You would do better by buying a term plan and investing the difference in say Public Provident Fund or the National Pension System, if you are looking for retirement income and are a conservative investor.
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First Published: Tue, Aug 21 2012. 10 15 PM IST