Bajaj Allianz Assured Protection Insurance Plan invests first in equity funds, and later in debt funds

Tuesday, April 5, 2011, 12:27 by Business Editor

There are times when we can take risks—usually when we are young. And there are times when we need to play it safe—as we get older. So why not do the same when we are investing money!

That’s what those managing Bajaj Allianz Assured Protection Insurance Plan promise to do for you. In the early years of the policy, they will put more of your money in equity-heavy funds but over time shift it to debt (read) based funds.

The company calls it “Wheel of Life Portfolio Strategy”. Here is table that shows how your investments will get allocated/reallocated as years go by:

Years to Maturity Proportion in following three Funds (%) Bond Fund (%) Liquid Fund

(%)

Blue-chip Equity Fund Equity Growth Fund 2 Accelerator Mid-Cap Fund 2 Total
20 20 50 30 100 0 0
19 30 50 20 100 0 0
18 30 50 20 100 0 0
17 30 50 20 100 0 0
16 30 50 20 100 0 0
15 40 40 15 95 5 0
14 40 40 10 90 10 0
13 40 40 5 85 15 0
12 40 40 0 80 20 0
11 40 35 0 75 25 0
10 40 30 0 70 30 0
9 40 25 0 65 35 0
8 40 20 0 60 40 0
7 40 15 0 55 45 0
6 40 10 0 50 50 0
5 40 0 0 40 55 5
4 30 0 0 30 60 10
3 20 0 0 20 65 15
2 10 0 0 10 70 20
1 0 0 0 0 80 20

So, initially all the money will be invested in equity-based funds. Then, from the fifth year onwards (in case of 20-year policy term), some of the money will be shifted to debt fund and the proportionate allocation for debt fund will increase. By the 16th year, all the funds will be moved to safe instruments. (If you have trouble reconciling what we are saying and what the table shows—we too were stumped at first sight—then just remember, that figure of 20 in Years to Maturity column is the first year of the policy term!)

All of the above if you let them manage your money. Else, the policy also allows you to choose which funds you wish to invest in and switch funds during the term.

Bajaj Allianz APIP is somewhat similar to the Wealth Insurance Plan in many aspects but differs in one crucial aspect: The latter is a Whole Life Plan which locks your funds till you get to 75 years in age but APIP comes with shorter policy terms of 10, 15 or 20 years.

The other interesting bit is that the plan can be used as a sort of Child Plan—if child is a nominee then partial withdrawls are allowed only after she reaches the age of 18.

Let’s look at some of the other key benefits of Bajaj Allianz Assured Protection Insurance Plan

Ø  A settlement option that lets you pull out your maturity proceeds in installments/tranches over the next—to end of your policy term—five years. This pull out can be yearly, half yearly, quarterly or monthly as decided by you.

Ø  Maturity Benefit – Upon the maturity of your policy, the policyholder receives the Fund Value as on the maturity date.

Ø  Surrender Benefit – This policy allows a policyholder to opt out of the policy anytime after the 5th year. The Surrender Value in that case would be equal to the Fund Value as on the date of surrender of the policy.

Ø  Additional Sum assured in case of accidental death:  If the insured person’s death occurs after attainment of 7 years, an additional benefit equal to the prevailing regular premium sum assured shall be payable.

Ø  Automatic annual increase in sum assured from 6th policy anniversary onwards.

Ø  Flexibility of

  • Partial withdrawals anytime after 5 years.
  • Unlimited free switches.
  • Changing the premium payment term.
  • Top-up premium payment in addition to regular premiums.
  • Settlement Option

Ø  Optional Riders for the benefit of the policyholder.

Having gone through the key benefits of Bajaj Allianz Assured Protection Insurance policy, let’s now examine its various aspects in detail.

Parameter Details
Minimum Entry Age 1 years (18 years in case of Additional Rider Benefits)
Maximum Entry Age 60 years ( 50 years in case of Additional Rider Benefits)
Minimum Age at Maturity 18 years
Maximum Age at Maturity 75 years ( Additional Rider Benefits ceasing at Age 65 years)
Policy Term 10,15 and 20 years
Minimum Regular Premium Rs 15,000 per yearly installment
Maximum Regular Premium Rs 24,000 per yearly installment
Minimum Premium Paying Term 7 years
Maximum Premium Paying Term Policy Term
Minimum Top Up Premium Rs 5000
Maximum Top Up Premium No Limit
Premium Payment Frequency Annual mode only
Minimum Sum Assured 10 times Annualized Premium for entry age below 45 years.

7 times Annualized Premium for entry age 45 years and above.

Maximum Sum Assured Policy Term times Annualized Premium, if any rider has been opted then maximum sum assured shall be same as the minimum sum assured.

Investment Options (Funds)

This unit-linked policy gives you the following array of 7 investment options (funds), each having a varied proportion of equity and debt, for you to choose from (based on your risk appetite and expectations of returns) –

Fund name Asset classes invested in (as a % of overall fund portfolio)
Bank Deposits & Money Market Instruments Equities Government Securitiess, Bonds, Fixed Deposits
Pure Stock Fund (shuns unethical sectors like gambling) 0-40% 60-100%
Bluechip Equity Fund (invests in NSE NIFTY-listed stocks, seeking to replicate returns registered by the benchmark index) 0-40% 60-100%
Equity Growth Fund II (investment in specific equity stocks having high growth potential) 0-40% 60-100%
Bond Fund (invests in high-quality fixed income securities) 0-100% 0-100%
Liquid Fund (invests in liquid money market and short-term instruments) 0-100%
Accelerator Mid-Cap Fund II (invests in a diversified pool of mid-cap and large-cap stocks, with at least 50% of equities exposure to mid-cap companies) 0-40% 60-100%
Asset Allocation Fund (allocates assets across equities, bonds and cash to build a balanced portfolio) 0-100% 0-100% 0-100%

Test case for investment returns

Age – 30 Years; Policy term – 10 years; Annual Premium – Rs. 15,000; Sum Assured -  Rs 150,000

Fund name Fund track record (rate of returns delivered till date from inception) Projected Maturity Benefit (based on fund track record till date; no guarantee, however) (in Rs.)
Pure Stock Fund 23.24% 357,493
Bluechip Equity Fund -26.59% - 112,800
Equity Growth Fund II 14.41% 157,098
Bond Fund 10.57% 97,241
Liquid Fund 10.02% 89,717
Accelerator Mid-Cap Fund II 9.10% 77,662
Asset Allocation Fund 8.86% 74,623

Premium Apportionment –

  • Under the investor selectable portfolio strategy you can choose to invest fully in any one fund or allocate your premiums into the various funds in a proportion that suits your investment needs. The premium apportionment to any fund must be at least 5%.
  • Under the Wheel of Life Portfolio Strategy, then you will not have the option to choose the proportion. The apportionment of the allocated premium will be as per the Wheel of Life Portfolio Strategy table.

Partial Withdrawals

The policy holder is entitled to making any number of partial withdrawals he wants, anytime after the fifth policy year–conditional upon several factors, a few of which are shortlisted below:

  • The minimum amount of partial withdrawal is Rs. 5,000 and the policyholder’s regular premium fund value after any partial withdrawal should not fall below 3 times of the annual premium (NAV) across all funds.
  • All partial withdrawals will be first made from the eligible top up premium fund value, if any, on First in First out basis. Once this fund value is exhausted, further partial withdrawals will be made from the regular premium fund value.

Surrender Benefit

There is a five year lock-in. After that you can withdraw from the policy and get whatever is the fund value in the sixth year. .

Tax Benefits

Premiums paid towards the Bajaj Allianz Wealth Insurance Plan are eligible for tax benefits under section 80C. On the other hand, you can claim tax relief for maturity benefit, death benefit and surrender value under section 10(10) D of the Income Tax Act.

Policy Termination

The policy shall automatically become void on the earlier occurrence of either of the following events:

  • The units in the policy are fully surrendered;
  • Upon death of the life assured;
  • Upon Maturity, if settlement option not taken;
  • Upon payment of discontinuance value;
  • Upon expiry of the period of settlement option
  • On foreclosure of the policy

Similar Posts:

Tagged with: ,