Product crack

Name of insurance policy

Max New York Life’s Secure Dreams

What is it?

This life insurance policy invests only in safe debt instruments such as government securities and corporate bonds.

What do I get?

If you die before the policy term ends, your beneficiaries get the sum assured and the company foots the remaining premium till maturity. If you survive the term, you get the fund value on maturity.

What’s special?

• You get at least 3.5% guaranteed return per year. This is added to your fund every month. So, in a year, every Rs100 invested will fetch at least Rs3.50, like a savings bank account.

• A loyalty bonus, which is 10% of the annual premium, is added to the fund value in each of the last five years of the policy.

What are the costs?

If your premium is less than Rs50,000, there’s a 30% upfront cost and nothing after that. If you invest a higher sum, there is no charge at all. However, the policy charges 0.125% of the sum assured every month for the first three years. After that, this charge is limited to a maximum of Rs150 per month. While mortality charges would depend on your age, there is no fund management charge.

What does all this mean?

For every Rs1 lakh premium paid, your family would get Rs10 lakh of the sum assured in case you die before the term ends. Assuming a minimum guaranteed return of 3.5%, after the deduction of costs, you would get 2.9% each year for 20 years (assuming you are 30 years old when you buy) and a 2.1% per year if your term is 15 years. This means that if you invest Rs15 lakh for 15 years, you would get back Rs17.41 lakh.

How good is good?

Because it invests in government securities, your returns can vary between 2.9% and 6.5%. For three months, ending December, it declared a return of 6.5%. The company will declare a return every quarter.

MONEY MATTERS TAKE

When a public provident fund gives you 8% returns per year with the same tax breaks, why should you go for this product?