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Pradeep Gaur/Mint
Pradeep Gaur/Mint

Product crack: DHFL Pramerica Flexi Cash

It pays a minimum guaranteed benefit on maturity along with bonuses

DHFL Pramerica Flexi Cash by DHFL Pramerica Life Insurance Co. Ltd is a participating traditional plan that pays you a minimum guaranteed benefit on maturity along with bonuses.

What do you get?

There are three policy term options: 15, 25 and 35 years. The premium paying terms are 5, 10 and 15 years, respectively. The annual premium will depend upon your age, the sum assured and the policy term chosen. You need to pay this premium every year during the premium payment term; on maturity, the policy will return the sum assured along with the accrued reversionary bonus accumulated during the course of the policy and final bonus, if any. A bonus is like an extra benefit that is given over and above what’s expected. In a traditional participating plan, the policyholder’s money goes into a life fund, and depending upon the fund’s surplus, the company declares a bonus from time to time. Called reversionary bonus, once declared, it becomes a guaranteed addition to your sum assured. It is paid on death or on maturity.

In case of death during the policy term, the policy will pay the beneficiary all the accrued bonuses till date along with death benefit, which is higher of 10 times the annual premium or the sum assured for a policyholder who is less than 45 years of age. For a policyholder who is 45 years old or more, the death benefit is higher of seven times the premium or the sum assured.

What’s special?

During the premium payment term from the second year onwards, the policy will give 10% of your premium back every year. You can offset this loyalty benefit against the premium paid. The policy also does not have a surrender charge once the the premium payment term plus five years are over. So, if the policy term is 15 years, you can surrender any time in the last five years with no surrender charge. If policy term is 25 years, it’s the last 10 years, and for a policy term of 35 years, the last 15 years.

If a policyholder surrenders during this time, she will be entitled to the sum assured plus all the bonuses accrued till then.

How does it work?

Say, a 30-year-old male buys this plan for a term of 35 years and sum assured of 10 lakh. The annual premium will be 81,990 for a premium paying term of 15 years. Assuming the fund grows at 8%, the net return will come to 5.84%. If the growth rate is half, or 4%, the net return will be 2.54%.

Mint Money take

We like the fact that the policy does not have an exit load or a surrender charge towards the latter part of the tenor. But you also need to see this plan in the light of insurance and investment benefits. As an insurance policy, it doesn’t score well; a term plan would be better. In terms of investment, since this is a participating plan, the returns would depend on bonuses declared every year, and there are charges in the policy. On an average, traditional plans usually give a return of 4-6%. You could consider investing in products such as Public Provident Fund, which currently offer a tax-free rate of 8.7%.

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