Well, the times are changing. And while this piece, by no means, wants to cast an aspersion on today’s generation in terms of their desire to look after their parents, the cold reality remains that old individuals/couples are increasingly being left high and dry after their retirement.

And if you want to simply avoid such a scenario from ever arising, then a pension plan is something that you should think of. Also known as annuity schemes, these policies helps one preserve his current lifestyle by giving him a regular income after retirement. Suggested read: Pension plans in India

The ‘ICICI Pru LifeLink Pension SP’ plan from ICICI Prudential, a tie-up between UK insurance biggie Prudential and India’s ICICI, is one such pension plan–with the additional benefit of a life insurance. In other words, this is an insurance-cum-investment policy.

However, unlike traditional pension plans, the ICICI Pru LifeLink Pension SP is a unit-linked/market-linked insurance policy (ULIP)–meaning the premium paid by you is used to buy market-related assets such as bonds, in order to generate investment returns that would fund your pensions. Remember that the premium invested in markets is net of applicable charges (premium allocation charge) that are deducted by the company.

Let’s then look at some of the salient features of the plan to get a sense of what kind of death benefit and pension payment one can expect.

Key characteristics of ICICI Pru LifeLink Pension SP

1.      Single-premium plan – One needs to pay the premium only when buying this retirement ULIP. So, if you have a lump-sum amount that you would like to park in some long-term investment, you can consider this scheme.

2.      Flexibility to choose the pension date – The policy owner has the choice to determine the period from which he would like to receive the retirement benefit/annuity. However, note that one can’t get pension before the age of 45. Why? Because, the minimum entry age for this policy is 35 years (upper limit set at 70 years). Similarly, the vesting age can range from 45 to 80 years.

3.      Guaranteed minimum Net Asset Value – The ICICI Pru LifeLink Pension SP plan invests your money in the Pension Return Guarantee Fund (PRGF) that commits to deliver an assured return by means of a guaranteed Net Asset Value of Rs. 19.10 at the time of vesting.

The PRGF seeks to honour its pledge by investing in a diversified pool of top-rated fixed income instruments such as debt (bonds), money market and cash.

However, the promise of a guaranteed minimum NAV lapses if you surrender the policy, or Death Benefit is awarded to your beneficiary in case of your death. In either of these circumstances, ICICI Pru will impose an annual surcharge of investment guarantee of 0.25% of the PRGF’s Fund Value towards adjusting the fund NAV.

It should also be kept in mind that the NAV applicable at vesting is the higher of the guaranteed NAV (Rs 19.10 for this plan) and the NAV on the date of maturity.

Here is an example –

4.      Death Benefit – In the event of the life insured’s demise during the term of the policy term (fixed at 10 years), the company will pay out the Sum Assured plus the Fund value at the time of the individual’s demise.

5. Five pension options – The policyholder has the option of selecting the pension plan, as he deems fit, three months prior to vesting of his policy. Here are the five options available to him–

a.       Pension option 1 – Annuity without return of purchase price (purchase price is nothing but the premium one has paid)

b.      Pension option 2 – Annuity with return of purchase price

c.       Pension option 3- Joint Life, Last Survivor with return of purchase price. Put simply, this option is for those who want to take life cover for two individuals (e.g. a couple), with the surviving spouse getting the annuity after his partner’s death–apart from the premium.

d.      Pension option 4 – Joint Life, Last Survivor without Return of Purchase Price

e.       Pension option 5 – Annuity guaranteed for 5, 10, 15 years

6.      Loyalty Addition – For premium payments of at least Rs. 50,000, the insurer will add as much as 2.5% of Fund Value to your corpus at the end of the 10th policy year.

7.      Tax benefits – One can claim tax exemption for the premium paid and benefits received under the policy, under section 80CCC and 10(10A) of the Income Tax Act.

8.      Surrender – You are not allowed to surrender/forfeit the policy before the completion of five policy years, i.e. the plan has a lock-in period of 5 years. However, ICICI Pru won’t levy any surrender charges as and when you decide to exit.

One should also note that the guaranteed NAV is not applicable for policy being surrendered. In such an event, the policyholder is entitled to only up to a maximum of one-third of the surrender value in lump-sum and the remainder of the Fund Value must be used to buy an annuity.

Sample case –

* The pension amount is decided by the insurance company in accordance with annuity rates set by the industry regulator, I.R.D.A, at the time of the policy maturing.

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 6^th 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 15^th 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

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) –

Test case for investment returns –

Age – 30 Years; Policy term – 20 years; Annual Premium – Rs. 50,000; Sum Assured -  Rs 1,000,000

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

Since this plan can be purchased online through credit card/debit card, it is hassle free compared to other ULIP plans that involve intermediaries like insurance agents etc.

In short, this is really an investment plan with a pretence of insurance. So if you have already covered yourself and are now looking to basically invest your money for higher returns, this could be one option.

The advantage of the plan is that it gives you access to some rather well-performing funds. And depending on your risk appetite at given point in time, you could always switch between them.

Let us look at some of the key benefits of Bajaj Allianz iGain III Insurance Plan

Ø  This plan offers a high allocation of 98% of the premium paid from the start itself.

Ø  From the 6^th policy year, this plan offers 100% allocation.

Ø  Inbuilt accidental death cover.

Ø  This plan provides policyholders the flexibility of selecting policy term of 10/ 15 or 20 years and premium paying term of 5 years to policy term.

Ø  An automatic annual increase in sum assured from 6th policy anniversary is provided to suit the policyholder’s needs.

Ø  You can choose between 7 investment funds to invest as per the risk appetite of the policyholder.

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

Ø  Two investment portfolio strategies to manage the policyholder’s investments better; including the Wheel of Life portfolio strategy, which will help the policyholder to balance and safeguard his investment.

Ø  Surrender Benefit – This policy allows a policyholder to opt out of the policy anytime after the 6^th year. The surrender value in that case would be equal to the Fund value as on the date of surrender of the policy.

Ø  Optional Riders for the benefit of the policyholder

Ø  Flexibility of

• Partial withdrawals anytime after five years from the commencement of the policy.
• Top-up premium payment over and above regular premiums
• Unlimited free switches
• Changing your premium paying term
• Decrease in sum assured
• Changing your premium payment frequency

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

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) –

Test case for investment returns –

Age – 30 Years; Policy term – 10 years; Annual Premium – Rs. 10,000; Sum Assured -  Rs 100,000

Premium Apportionment:

• As a policy holder, you can choose whether she invests the entire amount in one fund or across funds in desired proportion. In case of the latter, you’ll however need to make sure you invest a a minimum of 5% of premium into any fund.
• The policyholder may at any policy anniversary, change the proportion of premium to the funds he wants to invest in.
• If you choose the Wheel of Life Portfolio Strategy, then you will not have the option to choose where and to what extent you invest in a particular fund. In effect, you are entrusting your fund managers to manage your money for you—not a bad option if you are not heavily in markets or don’t have enough time. You can however opt of Wheel of Life Portfolio Strategy at each policy anniversary.

Switching Option

If the policyholder has chosen Investor selectable portfolio strategy:

• You have the flexibility to switch between funds. You are allowed to make unlimited free switches.
• But every time you switch, you will need to move a minimum of Rs. 5000/equivalent units.
• You can switch in/out of this Portfolio Strategy at any Policy Anniversary by giving a 30-day advance notice to the company.

Partial Withdrawals

The Bajaj Allianz iGain III Insurance Plan 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. So if you are paying Rs. 10,000 as annual premium, you will need to make sure there is at least Rs 30,000 left in your policy account after withdrawl.
• 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

You can, if you want, surrender the Bajaj Allianz iGain III Insurance policy after five years. In that case, you’ll get your money back with whatever returns the fund generates.

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 iGain III Insurance Plan 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
• Upon payment of discontinuance value
• Upon foreclosure.

Appendix – Wheel of Life Portfolio Strategy

• The company provides the policyholder with “Years to maturity based portfolio management”.
• At the commencement of the Policy, the policyholder’s premium (regular premium and top up premium, if any) would be allocated in various funds (namely Blue-chip Equity Fund, Equity Growth Fund II& Accelerator Mid-Cap Fund II) in the proportion as mentioned below.
• On each policy anniversary, the company will reallocate the policyholder’s fund value among various funds in the proportion based on the policyholder’s outstanding years to maturity.
• The premiums (regular premium and top up premium, if any) paid in that particular policy year will also be allocated in the same proportion.
• This will ensure that a balance is maintained between the policyholder’s “years to maturity” and level of risk to his investments to optimize the returns
• The rates of allocation/reallocation of the policyholder’s premium /fund value into various funds based on his outstanding years to maturity will be as follows:

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:

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 16^th 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 5^th 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 6^th 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.

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) –

Test case for investment returns –

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

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

Consider this: you have recently reaped a bonus bonanza from your annual performance review. And if you happen to be of one of those guys who really don’t score high on the “discipline” front when it comes to prudently managing their finances, then parking this lump-sum figure in a long-term investment strategy could be a sensible option.

And what if we tell you that apart from using this money for investment, you can buy yourself a life insurance cover (thus protecting your family in case of your unfortunate death)! Yes, folks, single-premium unit-linked insurance policies might just be what the doctor ordered for you.

Combining risk cover with investment, these ULIPs invest the premium–net of applicable charges–into asset classes such as equity (stocks), debt (bonds) and cash market.

Unlike regular-premium ULIPs requiring the policy holder to pay premiums at regular intervals (e.g. yearly, monthly or quarterly), single-premium market-linked insurance policies save you the hassle of having to fret over due dates for premium contributions.

A few other attractions of a single-premium ULIP –

1.      Policyholders, who discontinue their renewal premium payments in regular-term policies in the first five years, cannot get back their investments before the 5-year lock-in period. While the lock-in period applies to single-premium policies as well, there is no likelihood of the funds getting locked in to a ‘Discontinuance Fund’ at a guarantee of at least 3.5%.

2.      The maximum commission for a single-premium policy is set at 2%, ensuring that you will be levied lower charges as compared to regular-premium ULIPs.

3.      As opposed to a regular-premium policy, single-premium ones do not impose a recurring policy administration charge over the long term.

Single-premium ULIPs should also be considered by those having an irregular income flow (such as contract workers, freelancers), as well as youngsters wary of long-term commitment. Middle-aged individuals, in their early forties, may also weigh these policies if they have a lump-sum figure to invest over a long term–seeking to gift their grand-children during important events.

The Wealth Insurance Plan from Bajaj Allianz, a joint venture between Bajaj Group and German insurance giant Allianz, is one such single-premium ULIP we will look at today.

Here are some of the key highlights of the Bajaj Allianz unit-linked Wealth Insurance Plan

1.      Single premium payment upfront (with an option to pay unlimited top-up premium, thus increasing risk protection)

2.      Whole life insurance policy (lapses at age of 75)

3.      Maturity Benefit – On the life assured turning 75 years old, he gets the single premium fund value and top-up premium fund value, if any, and the policy lapses. So it acts as a type of endowment plan, offering lump-sum amount on maturity, thereby ensuring a steady post-retirement income.

4.      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.

5.      Loyalty addition – Bajaj Allianz will allocate “loyalty units”, ranging from 3-7% of the single premium at the end of the fifth year of the plan, assuming the policy has not been terminated at the end of the 5th policy year.

Put simply, the insurer will add loyalty units–based on the then prevailing unit price–of a figure equivalent to 3% for single premium of Rs. 50,000 to Rs. 99,999; 5% for single premium of Rs. 1,00,000 to Rs. 2,49,999 and 7% for single premium of Rs. 2,50,000 and higher. Don’t expect any loyalty addition for top-up premiums.

6.      The ULIP gives one the flexibility to make partial withdrawals, thus providing a liquidity option for sudden requirement of cash.

7.      A Systematic switching option lets you switch between any of the 7 investment options (funds) that the policy invests in.

8.      Optional rider benefits such as riders of accidental death and disability benefit allow you to increase your risk protection cover, subject to the payment of extra charges.

9.      The plan allocates 98% of the Single premium (and the Top-up Premium, if any) towards investment funds, thus providing a high allocation ratio to deliver potentially higher returns

Let’s then examine the various aspects of the Bajaj Allianz Wealth Insurance Plan in detail.

Basic facts –

i.                    Minimum Entry Age – 7 years (18 years for all Additional Rider Benefits)

ii.                  Maximum Entry Age – 65 years (50 years in case of all Additional Rider Benefits)

iii.                Minimum Maturity Age – Whole Life Plan. The ULIP will lapse on the life assured turning 75.

iv.                Additional Rider Benefit Ceasing Age – 65 years for all riders

v.                  Minimum Single Premium – Rs. 25,000 (for 7-60 years Entry Age); Rs. 50,000 (for 61-65years Entry Age)

vi.                Maximum Single Premium - Rs. 3,30,000

vii.              Minimum Top-up Premium – Rs. 5,000

viii.            Minimum Sum Assured – 1.25 times Single Premium (for 7-44 years Entry Age); 1.1 times Single Premium (for 45-65 years Entry Age)

ix.                Maximum Sum Assured – 5 times the Single Premium amount

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) –

Test case for investment returns –

Age – 40 Years; Policy term – 35 years; Single Premium – Rs. 25,000; Sum Assured – Rs. 31,250 (1.25 times the Single Premium)

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%.

Switching Option

1.      The policy owner can switch units from one fund to another by notifying the company

2.      The insured person will be charged Rs. 5,000 or the fund value, whichever is lower, as the minimum switching amount.

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:

1.      He should withdraw at least Rs. 5,000 on account of partial redemption.

2.      A minimum balance of Rs. 5,000 or 1/5th of the single premium, whichever is higher across all funds, has to be maintained following a partial withdrawal.

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.

Foreclosure

If, at any time after the fifth policy year, the policy holder’s single premium fund value becomes inadequate to subtract any of the relevant charges, then the remaining fund value as on date of such insufficiency shall be paid to him immediately and the policy will lapse.

Tax Benefits of Bajaja Allianz single premium unit linked Wealth Insurance Policy

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:

1.      The life assured dies

2.      Maturity proceeds are paid out

3.      Foreclosure of the policy occurs

4.      The units in the policy are fully surrendered

So what are the investment options it offers:

• Fixed Portfolio Strategy: This gives you the option to allocate your savings in the funds of your choice.
• LifeCycle based Portfolio Strategy: This offers an option to create an ideal balance between equity and debt, based on your age. This usually involves putting bigger chunk of your money into equity-heavy funds in the years (to maximize returns) and then gradually moving them into debt-oriented funds (to minimize risk). The table below shows how your funds will be allocated depending on your age:

• Trigger Portfolio Strategy: Here the objective is to ensure that gains—if any—made in equity markets are protected against volatility. So every time the NAV of the fund you are invested in jumps more than 15%, the gains are transferred into a debt fund to make sure that gains are protected. Also read: ICICI Pru Pinnacle II ULIP risk+investment policy review

Now let us have a look at some of the other benefits ICICI Prudential Life Stage Wealth II Insurance Plan has to offer

Ø  Top up: You have the flexibility to invest surplus money over and above your regular premiums but you must add at least Rs. 2,000 to the kitty.

Ø  Loyalty Additions: Paid at the end of every policy year, starting from the 10th policy year, on payment of all due premiums.

Ø  Tax Benefits: The premiums paid are tax deductible from your annual income up to a maximum of Rs 1 lakh (across all investments). The maturity benefits—the profit you make over time—to is tax free.

Ø  Flexible premium payment options: The policyholder can either pay premium throughout the policy term or for a limited period.

Having gone through the key benefits of this plan, let’s now examine its various aspects in detail.

Investment Options (Funds)

This unit-linked insurance policy gives you the following array of 8 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) –

Surrender Benefit

Surrenders are not allowed during the first five policy years. On surrender after completion of the fifth policy year, the policy shall terminate and Fund Value, including Top up Fund value, if any, will be paid to the policyholder.

Tax Benefit

Tax benefits under the policy will be as per the prevailing Income Tax laws.

Policy Termination

If the Life Assured, whether sane or insane, commits suicide within one year from the date of issue of this policy, only the fund value, including Top up Fund Value, if any, would be payable. If the Life Assured, whether sane or insane, commits suicide within one year from the effective date of increase in Sum Assured, then the amount of increase shall not be considered in the calculation of the death benefit.

This plan is best suited for those looking for a pure investment plan that also combines death benefit—though the death benefit (or risk cover bit of the plan) is probably for meeting the legal requirements. (IRDA—the insurance industry regulator—has mandated that all ULIPs must have death cover.)

Like other Bajaj Allianz plans, they have some good funds underlying them. So if you have surplus cash lying somewhere, and want to invest it, then this would be one of the options.

Key benefits of Bajaj Allianz Shield Insurance Plan

Ø  Single premium plan with fixed term of 10 years.

Ø  Sum Assured can be 1.1/1.25 to 5 times of the Single Premium.

Ø  You can choose from nine funds including Shield Plus Fund III. If you invest in Shield Plus III, then you get a guaranteed minimum return—Rs 170 after 10 years for Rs 100.

Ø  Return of up to 6.00% of the single premium at maturity as Guaranteed Addition.

Ø  Flexibility in terms of

o   Option to decrease Sum Assured—this will release more money to be invested in funds leading to more money at the end of policy term. This feature is useful in case you get yourself covered nicely with Term Plan (we like Term Plans very much and strongly recommend these) down the line.

o   Unlimited top-up premium payment.

o   Partial Withdrawals anytime after five years from the commencement of the policy—a standard feature in most such plans.

o   Unlimited Free Switches—a standard feature in most such plans.

o   Optional Rider Benefits—a standard feature in most such plans.

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

Investment Options (Funds)

This unit-linked policy gives you the following array of 9 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).

Some of the funds have good track record so if you are looking to invest in this plan for upside, go for it. But if the guaranteed return is what you are looking for, there are other plans such as ICICI LifeLink Pension SP that offer better guarantees.

Test case for investment returns –

Age – 30 Years; Policy term – 10 years; Single Premium – Rs. 50,000; Sum Assured – Rs62,500

Switching Option

• The policyholder can switch in or out between Asset Allocation Fund, Equity Growth Fund II, Bond Fund, Liquid Fund, Bluechip Equity Fund, Accelerator Mid-Cap Fund II and Pure Stock Fund at any time during the term of the policy.
• Switching into the Shield Plus Fund III or the Growth Plus Fund III is not allowed during the term of the policy but you can switch out, i.e., you can start with Shield Plus III and move into other funds but not the other way round. Switching out of Shield Plus Fund III would be at the prevailing unit price and not at any guaranteed unit price.
• The minimum switching amount is Rs.5, 000 or the value of units held by the policyholder in the fund to be switched from, whichever is lower.

Partial Withdrawals

The Bajaj Allianz Shield 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 single premium fund value after each withdrawal should not fall below 1/5th of the Single Premium or Rs. 5000 whichever is higher across all funds after a partial withdrawal. The Company may vary the minimum value of units to be withdrawn and/or the minimum balance of value of units to be maintained after such partial withdrawals (subject to prior approval from IRDA) by giving you a written notice of three months.
• All partial withdrawals will be first made from eligible top up premium fund value, if any. Once the eligible top up premium fund value is exhausted, further partial withdrawals will be made from the regular premium fund value.
• In case of minor life, partial withdrawal is allowed after attaining age of 18 years.

Surrender Benefit

• The policyholder’s surrender value will be equal to Fund Value as on date of receipt of request for surrender. No surrender charge is applicable on surrender.
• No surrender is allowed in the first five policy years.
• No guarantee of unit price shall be applicable on surrender of the policy.
• The policy shall terminate upon payment of the full surrender value.

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.

If you run through the various ULIP through our website, one thing that might catch your eye is that risk cover—payout in case of untimely death—is minimal. So in a sense, most ULIPs are really for investments rather than insurance.

The coverage has gone up since IRDA’s—the insurance regulators—new rules have made risk cover mandatory in 2010 and set a minimum limit. Still you’d be hard-pressed to find a plan that offers risk cover greater than 10 times the single premium amount.

But there are exceptions. One such ULIP launched after the enactment of the new set of rules for the industry was the Life Insurance Corporation’s ‘Endowment Plus’ plan.

The standout feature of this policy is the impressive Sum Assured benefit–(Policy Term +1) times the total premium per annum–if you go in for a regular-premium mode. Also read about ICICI Prudential Pinnacle II ULIP policy

So, for example, if a 30-year-old guy pays Rs. 20,000 annually for a policy term of 15 years, then his minimum Sum Assured turn out to be (15+1) times Rs. 20,000, i.e. Rs. 3.2 lakh–which is easily among the highest life covers one will get in a ULIP.

Apart from providing a cover against mortality risk (read, death), this scheme–via its set of four investment funds–allows you to invest your money in various market-related securities such as stocks, bonds, etc.

Once you decide on the type of investment funds (more on that a bit later), LIC will invest your premiums–net of applicable charges–into that Fund, by buying so-called “Units” of that Fund. These Units will be allotted based on the Net Asset Value of the given fund as on the date of allotment. Note that the NAV is dynamic, and varies according to the fund’s investment performance.

So when the policy term ends, you get the corpus amount, or the Fund Value, at maturity–based on the NAV on the date of maturity, multiplied by the total number of units allotted to you.

In other words, the LIC ‘Endowment Plus’ is a ‘risk + investment’ policy.

Here are some basic details of the plan –

Key characteristics –

1.      Death Benefit: In the event of the Life Assured’s death during the term of the policy, the company will pay his beneficiary/nominee the higher of Sum Assured and his Fund Value.

2.      Maturity Benefit: If the policyholder survives to the end of the policy term, then he will receive the Fund Value.

3.      Investment funds: You can choose from any of the following four investment funds, based on your risk appetite and expectations of return. For example, those in their early 20s-30s are relatively better off investing in an stock/equity-heavy fund, as opposed to those in their early-mid 40s who might want to opt for rather safe top-rated bonds.

4.      Switching: One is offered the flexibility of changing his investment fund for the entire Fund Value during the policy term, subject to switching charges, if any.

To get a tangible sense of what one can expect in benefits from the policy, here are a couple of illustrations –

For regular pay

For single-premium pay

5.      Partial Withdrawals: Assuming all due premium contributions have been made, the LIC ‘Endowment Plus’ plan lets you withdraw money partially only after completion of five policy years, subject to various conditions.

6.      Increase/Decrease of Sum Assured: The policyholder can’t enhance his Sum Assured during the tenure of the policy. However, he is given an option to reduce his life cover, without getting any discount on subsequent premiums, once a year during the Policy Term (assuming, all due premiums have been paid).

7.      Riders: For the uninitiated, riders are additional components of an insurance plan that expand or restrict the benefits which are otherwise payable, thus offering the policyholder a flexibility to change the scope of his original policy’s coverage.

The ‘Endowment Plus’ policy comes with two riders –

a.       Accident Benefit rider: For those above 18 years of age, the company gives a so-called Accident Benefit option, wherein an amount equalling the Sum Assured–subject to minimum of Rs. 25,000 and maximum of Rs. 50 lakh–will be payable in the event of the policy owner dying due to an accident. This benefit will be awarded on top of the Sum Assured for the basic plan.

b.      Critical Illness Benefit rider: In the event of the policyholder contracting any of the defined categories of Critical Illness, LIC will pay a Critical Illness Benefit equal to the Sum Assured–subject to a minimum of Rs. 50,000 and maximum of Rs. 10 lakh.

In other words, the policy pays out a lump-sum amount, or Sum Assured, to the insured individual’s nominee/beneficiary in the event of his demise during the term of the scheme.

Side by side, LIC also invests a significant proportion of your premiums–net of applicable charges–to buy so-called “Units” in a dedicated Samridhi Plus investment fund, which allocates the corpus across several asset classes such as stocks and bonds. Remember that the Net Asset Value (NAV) of this fund is subject to several charges and the value of the units may rise or fall, depending on market conditions. Also read: Top term insurance plans

Key characteristics

1.      Guaranteed Net Asset Value: The standout feature of the Samridhi Plus plan is its promise of delivering a “guaranteed NAV” at the end of the policy. Put simply, the company claims that on maturity of the plan, it will pay the Fund Value based on higher of the highest NAV registered by the Samridhi Plus fund over the first 100 months of the scheme–subject to a minimum NAV of Rs.10–and the NAV as applicable on the date of maturity.

Here is an example –

So, basically, when the policy term ends (i.e. the plan vests), LIC promises to pay a figure equalling the higher of the guaranteed NAV and the NAV on the date of maturity, multiplied by the number of units available in your account at the end of the policy tenure.

One should also keep in mind that the period to be counted for guarantee of NAV shall be 100 months from 25^th February (the date of commencement of plan). Suggested reading: Top critical care health insurance policies compared

2.      Death Benefit: If the insured person passes way during the course of the policy, then his nominee will receive the Sum Assured or the Fund Value, whichever is higher.

But, in case of partial withdrawal having been made during the last two years from the date of the Life Assured’s death, the beneficiary will get the Sum Assured subtracted by the amount of partial redemptions made.

3.      Investment Fund:

Here are some basic details of the plan –

Other key characteristics of LIC Samridhi Plus unit linked insurance policy

1. Rider – As you might be aware, riders are extra components of an insurance policy that expand or restrict the benefits which are otherwise payable, thereby providing the policy owner a flexibility to amend the scope of his original policy’s coverage.

The LIC Samridhi Plus policy comes with a rider called the ‘Accident Benefit Option’. Made available only to those above 18 years of age, this rider makes it mandatory for LIC to pay an amount equalling the Sum Assured–subject to minimum of Rs. 25,000 and maximum of Rs. 50 lakh–in case of the policy owner dying due to an accident. This benefit will be awarded on top of the Sum Assured for the basic plan.

2. Surrender: After the lock-in period of five years, if the policyholder wants to surrender the policy, i.e. redeem/withdraw his invested premium, then he will get the Fund Value, as on the date of surrender.

In case of death of insured individual after the date of surrender but before the completion of 5 years from the date the policy bean, LIC will immediately pay the proceeds of the Discontinued Policy to his beneficiary or legal heir.

3. Partial Withdrawals: Assuming you have paid all due premiums, the LIC Samridhi Plus plan allows you to withdraw money partially only after completion of five policy years, subject to various conditions.

4. Increase/Decrease of Sum Assured: The policyholder can’t enhance or decrease his Sum Assured during the tenure of the policy.

Sample case for a healthy male life

For Regular Pay

For Single-Premium Pay

NOTE: The LIC Samridhi Plus plan is available for sale only until 25^th May 2011.

You are in your early 40s, already have some sort of life insurance cover, and want to start building a nest egg for your retirement years. Quite rightly, so. And the daily gyrations of the stock markets–or the opacity of the real estate sector, for that matter–are not exactly your cup of tea, in terms of getting actively involved in these assets.

Yet, we believe, you are keen on getting some exposure to the Indian financial markets (read, stocks, bonds, etc.) in order to create some wealth over the next 15-20 years–the end goal being to have some sort of a stable monthly source of income post-retirement.

Well, Life Insurance Corporation’s ‘Pension Plus’ plan is an option you might consider. Launched last September, this unit-linked pension plan is targeted at individuals having a relatively lower risk appetite, who seek to invest funds for their retirement and intend to purchase annuity (read, pension) on maturity or withdrawal of the policy. Also read our detailed story on top pension plans in India

After you select the type of Investment Funds (more on that in a while), LIC will invest your premiums–net of applicable charges–into that Fund, by purchasing so-called “Units” of that Fund. These Units will be allotted, depending upon the Net Asset Value of the given Fund as on the date of allocation. Keep in mind the fact that the risks pertaining to such investments solely lie with you, and not LIC.

Key characteristics of LIC Pension Plus

1.      Minimum guarantee: The USP of this scheme is that it offers the policyholder a minimum guarantee on the gross premiums paid by him. Basically, one is assured of a minimum level of return on investments when the policy matures (i.e. the policy term ends).

This provision, incorporated by LIC in accordance with new guidelines enacted by the industry regulator IRDA, is aimed at shielding policyholders (typically senior citizens) from market volatility.

2.      Death Benefit: Don’t expect any life cover under the ‘Pension Plus’ plan, which doesn’t promise any Sum Assured, i.e. LIC won’t cover the policyholder for mortality risk (death).

In the event of the policy owner’s death during the course of the scheme, his nominee will be awarded the accumulated fund, or the Fund Value, only.

The beneficiary can choose to encash this amount either as a lump-sum figure or as an annuity (a fixed amount, say Rs.2,000, per month throughout the year).

Subject to the payable lump-sum amount and the then prevailing immediate annuity rates (as set by IRDA), the company will decide the annuity–based on the annuity option selected.

3.      Maturity benefit: When the policy matures/vests, LIC will use the higher of policy owner’s Fund Value and Guaranteed Maturity Proceeds to give him an annuity, depending on the then prevailing annuity rates.

However, the policyholder is allowed to commute (withdraw) as much as 33% of the Maturity Benefit as a lump-sum figure.

He also has the option of deciding to buy annuity from LIC or any other life insurer.

4.      Investment Funds: The ‘Pension Plus’ scheme, being a unit-linked product, invests your premiums–net of applicable charges–in one of the following two investment funds.

5. Payment of Premiums: This annuity plan allows you to make premium contributions at annual, half-yearly, quarterly or monthly frequencies over the duration of the policy. But if you want to pay everything in one shot, then a single-premium option is there as well.

6.      Top-up premium: One can pay extra premiums, on top of this base plan, for investment purposes.

7.     Surrender: After the lock-in period of five years, if the policyholder wants to surrender the policy, i.e. redeem/withdraw his invested premium, then he can only get back one-third of his total money as a lump-sum. He has to purchase annuity for the remaining two-third of the accumulated corpus.

Here are some basic details of the plan –

Benefit illustration for a 30-year-old healthy male

For Regular Pay

For Single-premium pay