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Product Crack | Variable insurance product

Product Crack | Variable insurance product


SBI Life Insurance Co. Ltd’s Flexi Smart Insurance


It is a variable insurance plan that borrows its investment strategy from a traditional policy as it invests largely in debt products and adopts the transparent structure of a unit-linked insurance plan.


The policy offers a minimum guarantee of 2.5% per annum on the premium amount that gets invested. Every year at the start of a fiscal year, the company will declare a rate of interest that gets credited to the investment account of the policy. This rate is a minimum of 2.5%; for FY12 it is 7%. The company may also declare another rate of interest at the end of the fiscal year depending on the performance of the underlying securities; this will get added to your account on a pro rata basis. The company may also pay you an additional rate of interest on maturity.

In case of your untimely death, your beneficiary will get the sum assured plus the balance in your policy account.


It gives you the option to take a premium holiday. You can take a premium holiday up to three years during the policy tenor. However you need to inform the insurer a month before the end of the grace period. During this period, the insurer will not deduct any mortality cost, but if you die during this period it will recover the mortality cost.

You also have the choice to alter your sum assured.


There are three costs you need to bear before any money goes to your investment account. The first, expenses, is a percentage of the premium; the percentage figure is different for different premium amounts. Broadly it ranges from 4% to 12.5%. The second, agent commission, is in the range of 1-20%. The third, mortality cost, depends on the age of the policyholder and the policy term.


The costs are high in this policy. If a 35-year-old buys it for 20 years and pays a regular premium of 1 lakh for a sum assured of 15 lakh, his net return will come to 3.71%, assuming a 6% growth rate. That means the cost in this plan is around 2.29%. On a 7% rate of interest, the rate for FY12, the net return would be around 4.71%.

We recommend you invest in a Public Provident Fund, which gives a tax-free and guaranteed rate of 8%, instead and buy a term plan. If you are in the lower tax bracket you can also look at fixed deposits, which are currently giving up to 9.5% for tenors above five years.

—Deepti Bhaskaran

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