Bajaj Allianz Smart Insurance III ULIP Plan review

Tuesday, April 5, 2011, 16:47 by Business Editor

With Smart Insurance Plan III, a ULIP product, Bajaj Allianz targeting people who have long-term investment needs combined with moderate insurance requirements.

The plan has a reasonable minimum maturity period of ten years—anything less really is unlikely to serve your needs of growing your funds significantly. Since the plan is investment-oriented, the bulk of the money you pay as premium goes into the funds that underlie this plan.

You can have a maximum insurance cover of 10 times your premium amount. So if you are paying Rs 50,000 as annual premium, then you’ll get a maximum cover of Rs 5 lakh. The good bit here is that out of that Rs 50,000, around Rs 2,000 will go towards insurance charges with rest being invested and left grow over the years.

Bajaj Allianz has thrown in accidental death benefit and the promise to return premium allocation charge if you complete the policy term to sweeten the deal. (Premium allocation in Bajaj Allianz Smart Insurance III ULIP Plan varies from 9% in year one to nill in the latter years. Overall, for a Rs 50,000 policy with term of 20 years, the charge would have drained investible amount by Rs 26,500. Now, if you complete the term, you’ll get your money back.)

Key benefits of Bajaj Allianz Smart Insurance III ULIP Plan

Ø  Inbuilt accidental death cover – 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  A settlement option enables you to encash the maturity proceeds in installments/tranches, which will be paid out yearly, half yearly, quarterly or monthly as decided by you–over a maximum period of five years.

Ø  Maturity Benefit – On maturity, the insured person will receive regular premium fund value plus top up premium fund value(if any), as maturity benefit. Also, if the policy term is 10 or 15 years, then he/she will receive loyalty addition in addition to his maturity benefit.

Ø  Refund of 100% of the total allocation charge as loyalty addition.

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

Ø  Option to select policy term of 10, 15 or 20 years and premium payment term from 6 years to policy term.

Ø  Choice of 7 investment funds to invest as per the risk appetite of the policyholder.

Ø  Flexibility of

  • Partial withdrawls are allowed anytime after 5 years.
  • Decreasing the sum assured by the policyholder.
  • Top-up premium payment in addition to regular premiums.
  • Unlimited free switches.
  • Changing the premium payment term.
  • Changing the premium payment frequency.
  • Optional Riders to enhance the policyholder’s protection.
  • Flexibility to receive maturity proceeds as settlement option.

Ø  Loyalty Addition – In this policy, you get loyalty addition as per the following terms and conditions

  • The loyalty addition is paid for an amount equivalent to 100% of the total allocation charge in respect of regular premium.
  • For policy terms of 10 and 15 years, the loyalty addition will be paid out as part of the maturity benefit.
  • For a policy term of 20 years, the loyalty addition will be allocated to the fund(s) chosen by the policyholder at the end of the 15th policy year, at the prevailing unit price(s).

Having gone through the key benefits of Bajaj Allianz Smart Insurance III ULIP Plan, let’s now examine its various aspects in detail.

Important Details

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 Premium Payment Term 6 years
Maximum Premium Payment Term Policy Term
Minimum Regular Premium Rs 50,000 payable in yearly, half-yearly and quarterly installments.

Rs 17,000 per monthly installment in case the monthly payment option is chosen.

(Monthly mode is available through ECS and Salary Saving scheme only).

No charges are applicable w.r.t. the mode chosen.

Maximum Regular Premium No Limit
Minimum Top Up Premium Rs 5000
Maximum Top Up Premium No Limit
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)

The funds available to choose from are a particular source of strength for this and indeed some of the other Bajaj Allianz insurance policies. Some of the funds have generated pretty impressive returns over their lifespan. We must however, warn you that past performance is not a very accurate indicator of future returns in stock markets.

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 Securities, 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 – 20 years; Annual Premium – Rs. 50,000; Sum Assured -  Rs 1,000,000

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% 13,989,421
Bluechip Equity Fund -26.59% -850,001
Equity Growth Fund II 14.41% 3,847,394
Bond Fund -147.68% -987,988
Liquid Fund -140.00% - 986,317
Accelerator Mid-Cap Fund II 9.1% 1,524,701
Asset Allocation Fund 8.86% 1,453,355

The three-funds showing negative returns are fairly new and therefore, their performance reflects very short-term market currents.

All the above returns are calculated after deducting varies charges and are for illustrative purposes only.

Premium Apportionment – One has the option of deciding to invest entirely in any one fund or distribute his single premium across the various funds in a ratio that he deems fit. Note that the minimum premium apportionment to any of the seven funds must be 5%.

Surrender Benefit

One has the option of forfeiting/surrendering his policy anytime from the sixth policy year onwards. On exercising this option, he will get a Surrender Value equal to the fund value as on date of surrender of the ULIP, with the policy ceasing to exist with immediate effect.

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 Bajaj Allianz Smart Insurance III ULIP policy shall automatically become void on the earlier occurrence of either of the following events:

  • The life assured dies
  • Maturity proceeds are paid out
  • Foreclosure of the policy occurs
  • The units in the policy are fully surrendered

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