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Product crack: Bajaj Allianz Elite Assure

Apart from guaranteed additions, the insurer may also declare interim bonuses or terminal bonuses at its discretion

This is a traditional life insurance policy, which means it doesn’t disclose costs in the policy. It’s a participating plan, so the investment benefits depend on performance of the participating fund—which come to you as bonuses—and on guaranteed loyalty additions.

WHAT DO YOU GET?

You start by choosing the guaranteed maturity benefit (GMB), the policy term and the premium payment term. The policy will then work out the premium, which will also depend on your age and premium payment frequency mode, such as annual mode or monthly mode. Being a participating plan, the insurer will declare a bonus as a percentage of the GMB every year at a compounded rate. Once declared, this gets added to the GMB and is payable on death or on maturity. In addition to this, the policy also pays guaranteed loyalty additions, which kick in after 10 years. This is declared as a percentage of the GMB as well, but it would depend on the policy term and premium payment term. So, if you choose a policy term of, say, 25 years and a premium payment term of 25 years, then every year from the end of the 10th year, the policy will pay 15% of GMB. This amount will get added to the GMB and become payable on death of the policyholder or maturity.

Apart from guaranteed additions, the insurer may also declare interim bonuses or terminal bonuses at its discretion. In terms of insurance cover, the sum assured is 10 times the annual premium. If the policyholder dies during the policy term, the policy will pay higher of 10 times the annual premium or the guaranteed maturity benefit. It will also pay the bonuses and guaranteed loyalty additions accrued till date. Again, the insurer reserves the right to give any interim and terminal bonus. Death benefit will have to be at least 105% of all premiums paid till date.

HOW DOES IT WORK?

Say, a 35-year-old buys a regular premium plan for a policy term of 25 years and for a GMB of 10 lakh. The annual premium in this case will come to 97,710. Assuming the participating fund grows at 8%, the total benefit available on maturity will come to 59.94 lakh. This is a net return of 6.35%.

MINT MONEY TAKE

As far as participating plans go, the post-cost return is one of the highest in this plan, but that’s not the only factor you need to consider when buying bundled insurance products. Mint Money advises against traditional policies due to their opaque product structure, high surrender penalties and relatively poor returns. According to experts, traditional participating plans typically give a return of 3-6%.

Also, the insurance element is weak. You would do better by keeping the two needs separate. We recommend a term plan for your insurance needs. For investments, first assess your asset allocation and pick up products such as the Public Provident Fund in the debt category and equity mutual funds in the equity category.

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