In this age of the ‘hybrid’ (right from hybrid cars, smartphones to Internet-enabled TVs), how can insurance products be left behind? While pure-vanilla term insurance plans still retain their allure for those looking to buy themselves a protection against the risk of their death, many consumers are now preferring policies that offer a bit more than that.
And while traditional endowment and money back plans have been around for quite some time in the Indian market, the pretty impressive rally in the stock markets over the past two decades has made the concept of unit-linked insurance plans pretty popular in this country.
After all, apart from entailing a risk protection for the possible loss of the insured’s life, such policies (ULIPs, in short) give the policyholder an investment route. How? By investing a significant portion of the premiums–net of the premium allocation charge–in several asset classes such equities and bonds.
The ‘Pru Pinnacle II’ policy from ICICI Prudential, a tie-up between ICICI and leading UK insurer Prudential, is one such ‘risk + investments’ scheme. It awards a lump-sum figure, or called the Sum Assured, to the policy owner’s beneficiary/nominee in case of his death. Plus, the plan pays out a certain amount during the maturity of the policy, depending on the returns generated.
A substantial percentage of the premiums paid under this scheme are invested in a dedicated Pinnacle Fund II fund, which allocates the corpus across several asset classes. The Pinnacle Fund II’s portfolio comprises equity and equity-linked securities, sovereign-rated debt instruments (government securities/Treasury Bills), and derivatives.
|Entry Age (minimum – maximum)||8-65 years|
|Maximum Maturity Age||75 years|
|Policy Term||10 years (fixed)|
|Minimum Sum Assured (for entry age <45 years)||10 x Annual Premium|
|Minimum Sum Assured (for entry age >=45 years)||7 x Annual Premium|
|Premium Payment Term||5 years|
|Premium payment frequency||Annual|
|Minimum Premium (in Rs.)||50,000|
|Maximum Premium (in Rs.)||2,00,000|
1. Guaranteed Net Asset Value – The standout feature of the policy is that it guarantees the highest Net Asset Value registered by the Pinnacle Fund II fund on a daily basis, during the first 7 years of launch of the fund–subject to a minimum NAV of Rs.10.
The 7-year period begins from 26/10/2010, the day the Pinnacle II Fund was launched, and will terminate on 26/10/2017.
It should be noted that the guarantee is valid only if you stick to the policy for its entire duration/term, i.e. if the policyholder allows the 10-year plan to mature.
2. Maturity benefit – When the policy term ends (i.e. the scheme vests), ICICI Pru will pay an amount equalling the higher of the guaranteed NAV and the NAV on the date of maturity, multiplied by the number of units allotted to you.
Here is an example –
|Guaranteed NAV (A) (the maximum recorded during the fund’s 7-year tenure)||NAV of the fund on maturity date (B)||Higher of A and B (C)||Number of units at maturity (D)||Amount payable at maturity, or Maturity benefit (C x D)|
|Scenario 1||Rs. 20||Rs. 15||Rs. 20||40,000||Rs. 8,00,000|
|Scenario 2||Rs. 20||Rs. 25||Rs. 25||40,000||Rs. 10,00,000|
3. Limited premium payment term – The Pru Pinnacle II policy requires you to make premium contributions for only 5 policy years.
4. Death benefit – If the policy owner passes away during the course of this ULIP, then his beneficiary/nominee is entitled to the Sum Assured plus Fund Value (and not the Guaranteed NAV), subject to Minimum Death Benefit.
5. Partial withdrawals – ICICI Pru lets the Life Assured withdraw money partially every policy year from the 6th policy year onwards–subject to a maximum of 20% of the Fund Value (not the guaranteed NAV) as on the date of partial redemption.
One can’t withdraw less than Rs. 2,000 at any point of time. Moreover, the concerned individual must be at least 18 years old to be able to withdraw funds.
Those of you thinking about any potential levies on this front need not worry–the company will not impose any surcharge for partial withdrawals.
6. Loyalty Additions – When the policy matures, the insurer will add so-called loyalty units to your fund corpus, based on the prevailing NAV (and not on the Guaranteed NAV).
7. Tax benefits – The policyholder can claim tax relief for the premiums paid and benefits received under the scheme, as per the prevailing Income Tax Act.
8. Surrender – You can’t forfeit/surrender your policy during the first five policy years. And when one does surrender after this lock-up period, the Pru Pinnacle II ceases to exist and ICICI Pru will fund the Fund Value.
9. No top-up – This unit-linked insurance scheme doesn’t have any provision for payment of top-up premiums.
10. Decrease/Increase in Sum Assured – One gets the option of decreasing or increasing his Sum Assured any time during the policy term.
Sample case for a healthy male life
|Entry Age||35 years|
|Annual Premium (in Rs.)||1,00,000|
|Sum Assured (in Rs.)||10,00,000 (10 x Annual Premium)|
|Premium Payment Term||5 years|
|Policy Term||10 years|
|*Fund Value at Maturity (in Rs.) (based on returns @ 6% per annum)||6,26,172|
|*Fund Value at Maturity (in Rs.) (based on returns @ 10% per annum)||8,52,477|
*Net of all charges, service tax and education cess