BackProduct crack: SBI Life’s Smart Future Choices
Unlike a classic term policy, where you first fix the sum assured, under this plan, you choose the premium amount that you want to pay and then you get the sum assured linked with it. The minimum annualized premium is ₹1 lakh
PremiumNEW DELHI: SBI Life Insurance Co. Ltd has launched a new plan called Smart Future Choices, which is the insurer’s first plan in nearly three years apart from Corona Rakshak Policy. The company is targeting millennials through this life insurance savings product, which is an endowment plan and will pay a lump sum after a specified period or on death.
Corona Rakshak was temporarily introduced by the Insurance Regulatory and Development Authority of India (Irdai) earlier this year, which pays a lump sum on hospitalization for 72 hours due to covid-19. The insurer had last launched SBI Life Poorna Suraksha, a term plan in January 2018.
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“Smart Future Choices provides consumers the power to configure the features of the product in line with their aspirations. The product comes with features specifically developed to suit the ever-changing needs of millennials. It offers modifications as per needs in the premium amount, policy term and premium payment terms," said Ravi Krishnamurthy, president, zone I, SBI Life.
We tell you what the plan entails and whether you should go for it.
Benefits
Unlike a classic term policy, where you first fix the sum assured, under this plan, you have to first choose the premium amount that you want to pay and then you get the sum assured linked with it. The minimum annualized premium is ₹1 lakh.
Individuals also have to choose the policy term and the premium payment term. The minimum policy term is 12 years and a maximum of 30 years.
The next step is choosing the benefit option. First is the classic option, where policyholders get lump sum maturity benefit at the end of the policy term along with life cover during the policy term. In the second option, called flexi choice, policyholders are eligible to get 10% of sum assured as survival benefit at specified intervals along with a maturity benefit of 80% of sum assured at the end of the policy term and the life cover.
Policyholders can change the benefit option within nine months of the end of the premium payment term.
Bonuses
According to the insurer, the cash bonus will be paid out at the end of each financial year. The bonus for first and second policy years will be paid out at the end of the second year and from the third year, the bonus will be paid at the end of every subsequent year. Policyholders will have the option of deferring the cash, which can be paid out in lump sum at any point of time during the policy term or at maturity or death of the insured.
“The product offers the option to choose cash bonus without the wait of maturity or defer cash bonus and ‘money on-demand’ feature offering survival benefit payouts at particular intervals," said Krishnamurthy.
The insurance may also declare a terminal bonus, which is paid out only on the maturity of the policy or on death. The bonuses are paid in the account of the policyholder.
How does it work?
Going by the example mentioned in the sales brochure of the plan, if a 35-year-old individual chooses a premium amount of ₹2 lakh, premium payment term of 10 years and policy term of 20 years, then he or she will get a basic sum assured of ₹21.61 lakh. The individual will get total a cash bonus of around ₹11.45 lakh and a maturity benefit of ₹19 lakh.
Tax benefit
An endowment plan comes with tax benefits as premium and benefits are eligible for tax exemption under Sections 80C and 10D of the Income-tax Act, 1961.
Expert take
Mint Money doesn’t recommend insurance savings products, as individuals must get comprehensive insurance and investment plans separately.
“As a millennial, the first priority should be to buy a term insurance when looking at life insurance, and then after that one can look at investment. Moreover, as this is participating policy, the returns from such plans are not known, as they depend upon the headline performance of the company," said Abhishek Bondia, managing director and principal officer, SecureNow.in, an insurance broker.
In a participating plan, the insurance company pays dividends to the policyholder, which are generated from the profits.
Moreover, according to Bondia, charges that come with these plans are quite high, which can impact the effective rate of return generated.
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