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Business News/ Money / Calculators/  Product crack: Birla Sun Life SecurePlus Plan
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Product crack: Birla Sun Life SecurePlus Plan

This plan comes with a fixed policy term of 13 years and a premium payment term of 12 years

Pradeep Gaur/MintPremium
Pradeep Gaur/Mint

This is a traditional insurance-cum-investment policy designed to give periodic income. Being a non-participating plan, the investment returns from the policy are guaranteed upfront.

WHAT DO YOU GET?

This plan comes with a fixed policy term of 13 years and a premium payment term of 12 years. The pay-out starts after the policy term. You have two pay-out options—six years and 12 years. If you choose the six-year option, then at the end of the first year of the pay-out term, you get an annual income equal to the annual premium. In the second year, it becomes 200% of the annual premium, 300% in third year, 400% in fourth, 500% in fifth and 600% in the sixth. For a 12-year pay-out term, the policy will pay 200% of the annual premium every year for 12 years. You can also choose to take a lump sum payment, but the insurer will discount future pay-outs to arrive at the present value.

In terms of the insurance benefit, the premiums that you pay and factors such as your age will determine the sum assured. The sum assured ranges from 14.5-19 times the annual premium; younger the person, higher is the multiple. If the policyholder dies during the policy term, i.e., in the first 13 years, the policy will pay higher of the sum assured, 10 times the annual premium, 105% of the premiums paid so far, or the maturity sum assured. The maturity sum assured is the present value of all the pay-outs. Additionally, if the policyholder dies due to an accident, the sum assured will double, to a maximum of 1 crore. The plan terminates thereafter.

If death occurs during the pay-out stage, the nominee will continue to get the income benefit as chosen by the policyholder.

HOW DOES IT WORK?

According to the product illustration, if a 35-year-old man buys the policy for an annual premium of 1 lakh with a six-year pay-out term, the sum assured will be 16 lakh. The pay-out term will start after 13 years and he will get a pay-out of 1 lakh at the end of the first year. This will increase by 1 lakh every year till the sixth year—net return of 4.7%. For 12-year pay-out, there will be an annual income of 2 lakh each year for 12 years; a net return of 5.1%.

MINT MONEY TAKE

This plan is better than most other guaranteed products in two ways. First, the insurance component is higher, and second, it gives a return of about 5% where most others give around 4%. Also, the investment benefit does not factor in the age, so returns do not dip for an older policyholder. However, financial planners do not recommend guaranteed insurance plans due to lower returns. At 5% return, you will have to invest more for the desired income. Also, if you have a long-term investment horizon, there are other debt products such as the Public Provident Fund or PPF (offers 8.1% per year currently) that can be looked at. Though the PPF does not guaranteed returns for the entire tenure, they are higher. If your investment horizon is long-term, then returns should be your focus.

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Published: 09 Jun 2016, 06:26 PM IST
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