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Product crack: Edelweiss Tokio Life Wealth Builder

A non-participating plan that guarantees investment benefit

What is it?

It’s a non-participating insurance plan that guarantees investment benefit upfront.

What do you get?

There are four premium payment tenors to choose from: 5, 7, 10 and 12 years, and five policy term options ranging from 10 years to 30 years. The sum assured for the 5-year and 7-year premium payment options is fixed at 10 times the annual premium. For the 10-year pay option, the sum assured is fixed at 11 times the annual premium and for the 12-year pay option, the sum assured is fixed at 13 times the annual premium. On death of the policyholder, the insurer will pay the nominee the sum assured plus accrued loyalty additions.

In terms of investments, the policy guarantees to pay the sum of all the premiums on maturity. In addition to this, there will also be loyalty additions that will begin to accrue after some time. For instance, for a 10-year policy term, the loyalty additions would accrue in the 9th and the 10th year and for a 30-year term, accrual will happen in the last 15 years, i.e. from the 16th year, until maturity.

These guaranteed loyalty additions will vary depending on the amount of premium, policy term and premium payment term chosen. It would also depend on the entry age and the gender of the policyholder.

What’s special?

If you choose to pay 60,000 or more as your annual premium, you will get additional benefits on maturity. For instance, for a policy term of 10 years, the policyholder will get 5,000 extra for every 20,000 of premium over and above 40,000. For a policy term of 30 years, this will increase to 20,000.

How does it work?

A 35-year-old male, paying a premium of 1 lakh for a premium payment term of 12 years and a policy term of 30 years will get around 45.20 lakh at the end of 30 years. This is a net return of 5.49%. Keep in mind that even as loyalty additions are fixed, there is still a huge variation because these additions depend on several factors. Accordingly, the net return on investment would vary. When we asked the insurer to give us a range of net return, it said the range would be from 4.65% to 6.50% depending on the age, policy term, premium and premium payment term.

Mint Money take

Given that this is a guaranteed plan, it would have been better if the policy had disclosed the net return on investment. Further, the loyalty additions vary and depend on several factors, which could confuse policyholders further. The only advantage of this policy is that compared with other guaranteed plans that offer an investment return of around 4%, this plan offers a higher return. Take the help of a financial planner to calculate your net return on investment and compare with other products in the market.

—Deepti Bhaskaran