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Product crack: Future Generali Pearls Guarantee

It's a non-participating traditional policy, tailor-made for periodic income and a lump sum benefit

It’s a non-participating traditional insurance policy that is tailor-made for periodic income and a lump sum benefit. Being a non-participating plan, it declares returns on the policy upfront.

What do you get?

It’s a regular premium plan with a limited premium-paying term. Choose a sum assured or death benefit and the policy will tell you the premium you need to pay every year during the premium-paying term. In case you die during the policy term—premium-paying term plus payout term—the policy will pay higher of 120% of the sum assured or 10 times the annual premium or 105% of all premiums paid till date. Once the premium-paying term is over, the payouts from the policy begins. There are two policy tenors in the plan—16 years and 18 years. For a 16-year tenor, the premium-paying term is 10 years after which the payouts will start. The policyholder will get an annual payout of 10% of the sum assured at the end of every year for five years and at the end of sixth year (on completion of the tenor), the policy will pay 70% of the sum assured and terminate. This is a total payout of 120% of the sum assured staggered over six years. In case of an 18-year tenor, the premium-paying term would be 12 years and payout six years.

How does it work?

Being a non-participating plan, the benefits of the plan are stated and guaranteed upfront. Let’s take an example to understand the returns in the policy. Suppose a 35-year-old buys this policy for a term of 18 years and a sum assured of 10 lakh. Annual premium in this case would come to 68,190 for a premium-paying term of 12 years. From the end of the 13th year, the policyholder will get a payout of 1 lakh every year for five years and at the end of the 18th year, he would get 7 lakh and the policy will terminate. This is a total payout of 12 lakh or a net return of about 4%.

Mint Money take

First let’s talk about the insurance component in the plan. For a premium of 68,190, the sum assured or insurance cover in the plan is just 10 lakh. This is very expensive when you compare the amount of insurance a simple term plan can buy for that premium. If you are looking at insurance, you should have a cover that’s about 8-10 times your annual salary. This plan will be a very expensive way to buy insurance. Now let’s come to investments. This is a long-term investment product that guarantees a return of around 4%. Even as you go home with the satisfaction of a guaranteed return, a 4% return is bound to leave you poorer if you factor in inflation that has been consistently higher.Consider other debt products such as Public Provident Fund, and fixed deposits if you are in the lower tax bracket, instead.

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