ICICI Pru Life's Online Term Cover - I Protect

Dear friends, Earlier it was Aegon Religare's I- Term, the lone player in online Term cover Market but now it has a companion from the big daddy of private life insurers in India - ICICI PRU Life. The product is named as I-Protect. 

Product at a glance -

Minimum /Maximum Age at entry - 20 / 65 years

Policy Term - 10, 15, 20, 25, 30 years

Maximum age at policy expiry - 75 Years (Age completed Birthday)

Minimum Premium - 2000 Rs. (Excluding Service Tax & Education cess)

Accidental Death Benefit (Available with IProtectOption II only) - Equal to basic sum assured with maximum limit to 50L

Premium Payment term - Regular pay

Mode of Premimum Payment - Yearly only

Tax benefit - Prem. paid is eligible for Tax benefit under Section 80C of Indian Income Tax Act, 1961

Available Options - Option I Basic Life cover, Option II Basic Life Cover With Accident Death Benefit Rider

Death benefit - Option I - Basic Life Cover

Option II - Basic Life Cover + Accident Rider Sum  Assured equal to Basic Sum assured or 50L whichever is lower

Instant Life Cover - Policy 'll be issued immediately after realization of the prem. amount by the Ins. Co. for Non Medical Cases.

Maturity Benefit - Being a pure Vanilla Term Cover, there is no maturity benefit.

Offline Purchase - Yes allowed with a slightly higher prem. (To include the commission of Agent/Broker)

My take - I-Protect is a real competitor for Aegon Religare's I-Term. Actually it's better than I-Term. How here it goes - 

Max. Term - 30Y in I-Protect for 25Y in I- Term

Accident Rider - Yes for I-Protect no for I- Term

Offline Purchase - Yes for I-Protect no for I-Term

Maturity Age - 75Y for I-Protect  where as it's 65Y for I-Term

The major plus point with I-Protect, ICICI Pru Life has offices, agents, brokers, bankassurance channels in every nook & corner of India, Hence purchasing the cover online of offline is very easy as compare to Aegon Religare's limited presence.

In my view, if you are planning to purchase your first Term cover or want to increase one, go for this one.

For More info about the product click here.

Thanks

Ashal

JEEVAN TARANG AS AN ANNUITY OPTION

Q. - Is it better to go for an annuity like Jeevan Tarang of LIC or an MF with term insurance.Annuity offers returns for lifetime whereas MF does not.Also please tell me which is the best annuity available.My age is 39 and i am due to retire on age 58? - Vinod Pulari

ANS. - Dear Vinod Pulari, Plz. don't opt Jeevan Tarang, for ur age the return from this policy r very poor. Sample this -
For a 5L cover, for ur age, the prem. for 20Y policy = 24610 Rs.

Hence total prem. paid over 20 years = 492200 Rs.
For past 4 years the LIC have announced 48 Rs. bonus per annum per 000 sum assured, so we can take this as benchmark for our calculation.
At the end of 20 year, u 'll get amount = 20*48*500 = 480000 Rs. or appx. ur prem. back.
From 21st year u 'll get 25000 Rs. (5% of 5L Rs.) as survival benefit every year tax free till u r alive.
After ur death, ur nominee 'll get the basic sum assured of 5L Rs. back as maturity benefit.
Now compare this with the combo of PPF+Term Plan (Anmol Jeevan from LIC).
Plz. note cheaper term insurance plans r available in market but i'm limiting it to LIC's Anmol Jeevan for comparing of product within same Ins. co. The annual prem. for 5L cover for 20 Year plan = 3193 Rs.
difference in the prem. = 24610-3193 = 21417 Rs.
Invest this amt. every year in PPF, at the end of 20 year, the amt. in PPF = 10.58L
Withdraw from PPF amt. equal to bonus declared by LIC = 10.58L - 4.8L = 5.78L Rs.
This 5.78L Rs. 'll remain in PPF 'll earn interest for next year. After 1 year the interest on 5.78L Rs. = 46240 out of which u may withdraw 25K Rs. as tax free.
Balance amt. 'll remain with PPF & like vise every year, u 'll withdraw only 25K & the PPF amt. 'll keep on increasing.
Plz. note in this case even after 25 years or 30 years from now onwards or for ur age of 65-70, at ur death, ur nominee 'll receive more than what they 'll get in Jeevan Tarang (the basic sum assured of 5L Rs. only).
Now do tell me, what r u going to opt?
Plz. note here i have not advised to invest in any Eq. MFs for betterment of return. U r already aware that PPF is one of the safest scheme.


Thanks

Ashal

NEW PENSION SYSTEM - NPS

Dear friends, a lot of u were demanding details on the NPS, so for  benefit of all of you. Here i'm giving some details of this.

WHO CAN INVEST?
Scheme is open to all Indian citizens aged between 18 years and 55 years.

WHERE TO INVEST??
You can invest from any of the 285 Point of Service across India, run by 22 Point of Presence Providers(POP) including SBI, its 7 Associate Banks, ICICI Bank, LIC, Reliance Capital, etc. Once registered, the Central Recordkeeping Agency (CRA) will give you a Permanent Retirement Account Number (PRAN) along with Telephone and Internet Passwords.

HOW DOES THE NPS WORK??
Just like a Depository maintains Demat Accounts, likewise your Records are maintained by the Depositories.
Six Different Pension Fund Managers would invest the Amount Invested by the Commonn People into Different Asset Classes classifed as
Equity (E)
Government Securities (G)
Debt Instruments (C)

The Six Fund Managers are
ICICI Prudential pension Management\
IDFC Pension Fund Management
Kotak Mahindra Pension Fund
Reliance Capital Pension Fund,
SBI Pension Fund
UTI Retirement solutions

Depending on the efficiency of the Fund Manager, these Contributions would Grow and accumulate over the years.
You do need to mention the Fund Manager of your Choice, without this, your Application is liable to be rejected.
The Default Investment is called the Auto Choice Lifestyle Fund.
For a investor below 35 years of age, 50% of investment amount will go into E(Equity), one-fifth into asset class G(Govt Securities), and the rest into asset class C(Debt Instruments). From the age of 36, the default proportion going to equities decrease annually and investment percentage in government securities will increase such that by the age of 60, these investments will gradually be adjusted so that only 10% remains in equities, another 10% in corporate bonds and 80% in government bonds.

MINIMUM CONTRIBUTION :
Minimum Contribution per annum is 6000 and you can contribute even as low as 500, at least 4 times a year. You can invest through Cash, Cheque or DD at the POP.
There is no upper ceiling for your annual contribution but Tax Benefits is capped at 1 lakh under Sec80C. The Investor HAS to invest at least once every quarter. In case of default, you will have to pay Rs.100per annum and also need to pay the required minimum amount to reactivate your Account.
Also during this period of your non-payment, your Corpus will keep getting reduced because the NPS will keep charging its Expenses against your Units. The Account will be closed as and when the Value of your Account falls to Zero.


WHERE IS MY MONEY INVESTED???
You have got the Right to decide where your money is invested. Please note, that you cannot invest more than 50% in Equity and Fund Managers cannot in invidual stocks but only in Index Funds.



RETURNS :
On Completion of 60 years, the investor`s accumulated amount gets transformed into a lumpsum towards buying Annuity for a steady stream of payments for the rest of the Investor`s life. The Insurance Companies, who come into the picture now, with their expertise will compute as to how long the investor could survive and offer flexible investment and payment options on annuities.
If the subscriber exits the scheme before the age of 60, s/he may keep one fifth of the accumulated saving and invest the rest in annuities offered by insurance companies.
A person who exits NPS when his age is between 60 and 70 has to use 40% of the corpus to buy an annuity and can take the rest of the money out in one go or in instalments. If a subscriber dies, the nominee has the option to receive the entire pension wealth as a lump sum.

LAST YEAR THE NPS GAVE A RETURN OF 14.82% WHILE HANDLING THE CORPUS OF CIVIL SERVICE PENSIONS.


TAX ANGLE :
At present, the NPS is to be Taxed at the time of Withdrawal. The Pension Fund Regulator has taken up the issue with the Finance Ministry to address the anamoly and the decision is expected within next year or so.


NEGATIVES :
1) Though the Fund Management is ridiculously low at a miniscule 0.0009% per annum, the Cost of Opening an Account(Rs.50), Annual Maintenance Charge(Rs.350) and a Per Transaction Charge of Rs.10 actually makes the NPS COSTLIER than a Regular Mutual Fund with a 500 monthly sip. The cost works out to around Rs.350 as fixed cost on every Rs.2000 he contributes. Unless the Govt steps in to correct this, NPS would be a failure with the small savers.
2) No Tax Concession on Withdrawals.
3) No premature Withdrawals allowed expect for Critical Illness, building/buying a house; Even at sixty, you can only withdraw as cash 60 per cent of the corpus, the rest must be used to buy an annuity.
4) You need to compulsorily buy Immediate Annuity with 80% of the Money accumulated, if you want to Withdraw before you are 60.

POSITIVES :
1) The Investor has the option of shifting from One fund Manager to another by instructing his POP to do so. This facility is available between May 1 and May 15 every year.

2) Even relocating to another city will not affect your investment as the PRAN remains the same.
3) The Monthly/Quarterly Contribution towards the NPS will be partly routed towards Equity which will automatically ensure Rupee cost Averaging and ensure High Returns and thus ensure 'higher than inflation' returns.
4) Investment upto Rs.1 lakh is Tax Deductible under Sec80c.
5) For Investors with slightly larger amounts and investing 4 times a year, the charges are attractively low. The NPS wins hands down on this matter.

CONCLUSION :
This is the Best thing to have happened to the Indian Investors who have not had much of a choice regarding Pension earlier. The benefits of Compounded Returns that the NPS offers will be immense. If the NPS is promoted in the right way, it will be no less than a Revolution.
The Tax on Withdrawal, for me, is a blunder and will be rectified by the Govt sooner rather than later.
The Interim Withdrawal too may be allowed in future, which will make this product that much more attractive.
The best option as of now i think is to remain invested in max. Eq. for person below age 50 & above that should go for the LifeCycle Fund.
The Low Charges and Automatic Rupee Cost Averaging makes NPS a Better Option than the Pension Plans offered by Insurance Companies.

But still some loose ends are there so as of now enter in NPS with minimum annual commitement of 6K Rs. & wait for the dust to settle & the clarity on taxation matters & then bump up ur investment in NPS.

Thanks

Ashal

Jeevan Varsha - New Guaranteed Return Money Back Plan from LIC

Dear friends, There is a new money back product on offer from LIC with GTD. Returns. The plan is open for purchase from 16th February, 2009 to 31st March, 2009.  The prem. paid are eligible for Section 80C Tax benefits as well as money back & maturity amounts are also Tax free underSection  10 (10) (D). Here is the plan scan for benefit of all of you.

ELIGIBILITY CONDITIONS

Minimum Entry Age: 15 years (completed)

Maximum Entry Age: 66 years (Nearest Birthday) for 9 years term policy, 63 years (Nearest Birthday) for 12 years term policy

Policy Term : 9 years & 12 years

Premium Paying Term: 9 years

Maximum Maturity Age: 75years (Nearest Birthday)

Minimum Sum Assured: Rs. 75,000/- for monthly ECS mode               : Rs. 50,000/- for other modes

Maximum Sum Assured: No limit 

PREMIUM PAYMENT MODES: Yearly, Half-Yearly, Quarterly, Monthly (by ECS mode only).

Survival Benefits:

For 9 Years Policy Term

15% of the Sum Assured is payable at the end of 3 years.

25% of the Sum Assured is payable at the end of 6 years.

60% of the Sum Assured is payable together with Guaranteed Additions, and Loyalty Addition, if any, at the end of 9 years.

For 12 Years Policy Term

10% of the Sum Assured is payable at the end of 3 years.

20% of the Sum Assured is payable at the end of 6 years.

30% of the Sum Assured is payable at the end of 9 years

40% of the Sum Assured is payable together with Guaranteed Additions, and Loyalty Addition, if any, at the end of 12 years.

Death Benefit:

In case of death of the life assured during the policy term, the full sum assured is payable irrespective of the survival benefits paid earlier.

On death during the policy term excluding last policy year: Sum Assured with accrued Guaranteed Additions

On death during last policy year: Sum Assured with accrued Guaranteed Additions along with Loyalty Addition, if any.

Guaranteed Addition :

The policy provides for Guaranteed Addition at the following rates:

Rs. 65 per thousand Sum Assured per year for a policy of 9 years term.

Rs. 70 per thousand Sum Assured per year for a policy of 12 years term.

I calculated the return generated by this policy for a healthy male aged 30 years & sum assured of 10L Rs. with annual prem. Mode (to get highest rebate on tabular prem. Thru annual prem. Mode & high sum assured) for both term 9 & 12 years. For 9Y policy the prem. is 153909 Rs. per annum & for 12Y policy the prem. is 157094 Rs. per annum. Now plz. Go thru the following calculation. Here I had assumed the money back received from the policy ‘ll be reinvested till maturity of policy to earn post tax return of 8%.

1. 9Y Term

A. Total prem. paid over the policy term = 1385181 Rs.

B. 1st M/B (Money Back) after 3Y = 150000

C. Value of B at policy maturity (after remaining 6Y) = 238031

D.  2^nd M/B after 6Y = 250000

E. Value of D at policy maturity = 314928

F. Final M/B at policy maturity = 600000

G. Gtd. Addition @ 65 Rs. per annum per 1000 SA = 585000

H. Loyality addition (not Gtd.) = 50000

I. Total Maturity amount =  C+E+F+G+H = 1788000 Rs. appx.

For an annual prem. of 1.54L Rs. The I above (maturity amount) is @ 5% rate of return only.

2. 12Y Term

A. Total prem. paid over the policy term = 1413846 Rs.

B. 1st M/B after 3Y = 100000

C. Value of B at policy maturity (after remaining 6Y) = 199900

D.  2^nd M/B after 6Y = 200000

E. Value of D at policy maturity = 317374

F. 3^rd M/B after 9Y = 300000

G. Value of F at policy maturity = 377913

H. Final M/B at policy maturity = 400000

I. Gtd. Addition @ 70 Rs. per annum per 1000 SA = 840000

J. Loyality addition (not Gtd.) = 75000

K. Total Maturity amount =  C+E+G+H+I+J = 2210000 Rs. appx.

For an annual prem. of 1.57L Rs. The K above (maturity amount) is @ 5.62% rate of return only.

 

Conclusion –  From the above calculation, everyone can see itself that the returns generated by this policy r not that much impressive as it looks on first glance. For lower Sum assured say 1L or 2L Rs. & for higher age the returns ‘ll be even lower. Also there is no guarantee of Loyality addition which I had considered in my calculation.

Plz. Don’t fall in the trap of gtd. Returns offered by this policy. It’s making wealth for LIC & it’s agents only, not for U, the Policy Holder. 

Health Saver Plan - New Plan from ICICI Prudential Life Insurance Company

Hi, There is a new plan "ICICI Pru Health Saver" in market. This is being called as ULIP and which boast of availing tax benefits u/s 80D for the entire amount invested. Being a ULIP, Because of benefits u/s 80D It looks attractive. Please analyze this plan and give your expert opinion about it. Many Thanks for your time. Regds Vivek Answer -  Dear Vivek, earlier the combo of Health Plan & ULIP was available from LIC as well as Reliance but in both these policies, the 80D benefit was not available on investment part. So ICICI Prudential Life Ins. cos. has moved with this cleverly drafted policy. Here the investment part of ur prem. or in other words fund value can only be redeemed against medical treatment/expenses. This policy is a combo of usual mediclaim policy & ULIP. Just dig deep into the skin of this policy & u `l come to know the real truth. First understand what this policy offers? apart from a normal mediclaim benefit, due to investment component from 3rd policy years onwards u can claim more than ur standard Sum assured with a ceiling set by company. Say ur original SA is 3L Rs, after completing 3 policy years u can claim a normal claim of 3L rs. under mediclaim benefit & another 20% of ur accumulated fund value. In other words u can redeem ur fund upto 20% value of fund. This fund value ceiling `ll increase with the years pass & after 10 policy years u can claim 100% of fund value. As per the product brochure of this plan, This policy can be taken as individual plan as well as family floater plan. For individual Plan - Min. entry age is 25 years completed & max. age is 55 years. For family floater Plan - Min. entry age is 90 days & max. age is 55 years. In each of the above policy the maturity age is common i.e. 75 years. Here r the negative aspects of this plan. 1. High Prem. allocation charges - 20% for 1st year, 2 & 3 year 9%, 4-10 years 2% & Nil from 11 year onwards. 2. In case of family floater option, in case of death of primary insured (the eldest member of family), the policy `ll be terminated immediately. 3. Regular prem. pmt. is compulsory for first 5 years for cover continuance option i.e if u don`t want to pay prem. in future to keep policy in force u `ll have to pay prem. for first 5 years. 4. No surrender of policy is allowed except the first 15 day free look period window. 5. Ins. charges for general mediclaim policy as well as policy admin charges `ll be recovered by cancellation of UNITs which `ll impact u severely in prolong bearish phases like the current one. 6. For individual plan option the mly. policy admin charge is 60 Rs. where as for family floater option the same is 90 Rs. 7. A long list of exclusion, which i can`t post here in this limited space of MMB. 8. Actually the health saving option of this policy is similar to our general practice of dipping into our savings to sat off the medical bills. 9. Plz. note the prem. for general mediclaim benefit (known as Hospital insurance benefit in this policy) `ll be charged on ur actual age every month by cancellation of ur UNITs. this is not the case in normal mediclaim policies of Gen. ins. cos. where u pay prem. as per age band of say 31-35, 36-40...... Again this monthly cancellation of UNITs `l impact more in case of bear phases as more UNITs `ll be cancelled to pay insurance prem. per month. In my view - The same effect of mediclaim & saving can be achieved by purchasing a cheaper mediclaim policy as well as investing the surplus amount as per our comfort level in Eq. or Debt funds or anywhere else. So this policy should be avoided. Thanks Ashal

JEEVAN AASTHA POLICY FROM LIC

Dear friendS, This new plan of LIC although provides gtd. returns but plz. note the NET Yield is variable for different age person due to difference in prem. paid for the same amount of cover.

Some info for this policy is given below.
Minimum Sum assured = 150000 & can be purchsed in multiples of 30000
Max. Sum assured = No limit
Prem. type = single prem. only
Type of policy = Traditional endowment policy with gtd. return
Minimum entry age = 13 years (nearest birth day)
Max. entry age = 60 years (nearest birth day)
Policy term = 5 years or 10 years
in First policy year the SA = 6 times of Single prem. paid (appx.)
From 2nd year onwards SA = 2 times of single prem. paid (appx.)
Maturity SA = 1/6th of original SA
GTD. addition per year = 100 Rs. for per 000 maturity SA for 10Y plan & 90 Rs. for 5 year plan
Loan & surrender value = after completion of 1st policy year

Sample benefit illustration for a 35year normal healthy male stamdard life.
Age of life assured = 35 years
SA = 300000
Maturity SA = 1/6 of Initial SA = 50000
Single prem. = 48975
Term of policy = 10 years
In case of death during 1st policy year claim amount = Initial SA + GTD addition = 300000 + 5000 (@ 100 Rs. per 000 maturity SA for 50,000 maturity SA)
In case of death during 2nd to 10th year claim amount = 100000 (reduced SA) + GTD. addition of 5000 Rs. per year
Maturity amount after 10 years = 50000 (maturity SA) + 50000 (gtd. addition) + 10000 (lyality addition if any, not gtd.) = 110000 Rs.

From investment point of view (it `ll be the main sales pitch to be adopted by LIC agents al over india), the CAGR for above person = 8.43% with Loyality addition & 7.5% with out Loyality addition of 10000 Rs. which is non gtd.

My Take on jeevan Aastha plan -
It`s a carefully designed Fixed Maturity Plan (FMP). Yes u read it right, it`s indded a FMP as the term as well as returns r known to u before taking the policy & are almost gtd. in nature (just leaving loyality addition as a non gtd. one).
Being an ins. plan offered by the largest Ins. co. of india, it`s also Tax efficient too. In the first year the SA is almost 6 times of single prem. hence 20% prem. to SA rule is taken care off at the time of investment. being investment oriented policy, from 2nd year the SA is reduced immediately to have lesser expenses for mortality charges.

The biggest catch lies in the GTD. bonus calculation.
PLZ. NOTE THE GTD. ADDITION `LL BE CALCULATED ON THE MATURITY SA ONLY WHICH IS 1/6TH OF INITIAL SA.

As the maturity amount is fixed for the policy term, the Net yield (CAGR) `ll be higher for persons in the age bracket of 13-35 years & `ll be very low for the persons in 45-60 age bracket. Anywhere from 6% to 7%. This is due to higher mortality charges for this age bracket.

My Judgement - 

This Policy is not suitable for any age class. for Y`ger people (20-35 age), the 10 year term can provide better returns from market linked instruments like Eq. & Debt. MFs. For older age people the return is not that much attractive. In fact for the persons who r in their 50s, the 10.5% bank FDs & PPF & Bhavishya Nirmaan Bonds (BNB) of Nabard r better option. as By that time the Ins. needs r over & even if one purchase it for ther partial ins. benefit, the real ins. is very poor.
- PLZ. DON`T TAKE THIS POLICY. -

Thanks

Ashal