To begin with, the purpose of the article is to analyse the new offerings of various Insurance companies. As the month of March approaches, we find a host of insurance products launched in the market. This year we are bombarded with insurance products which guarantee paying highest NAV at the end of the policy term. These policies are shown as giving equity returns with a guarantee of the maximum NAV on the term of the policy.
I have chosen three such policies and analysed their features to gain better understanding of the product. These are :
- LIC’s Wealth Plus
- ICICI Pru Pinnacle
- BSLI Platinum Premier Plan
The important features of all these plans are compared and tabulated as Annexure I
LIC’s Wealth Plus
This is an 8 year product in which one pays premium only for the first 3 years. The highest daily NAV in the first 7 years is guaranteed.
Advantages
a) Low premium of Rs. 20,000 pa or Rs. 2,000 monthly (ECS only)
b) Life cover is extended for 2 years even after completion of the term, ie the life cover is valid for 10 years even after the Fund Value is paid at the end of 8th year.
c) In case of death during the policy term, the nominee shall receive Sum Assured under the basic plan together with the Policyholder’s Fund Value as death benefit which is not the case in other similar policies of different companies
d) Policy administration charges are constant (Rs. 60 in 1st year and Rs. 25 in 2nd year and increases by 3% every year after that) irrespective of the premium amount. Hence the net yield of this policy is better as compared to other policies
Disadvantages
a) Investor has no say in Fund and it could be 0 to 100% in Equities and Debt depending on the Fund Managers choice
ICICI Pru Pinnacle
Pru Pinnacle is akin to LIC’s Wealth Plus with premium payment in first 3 years but the policy term is 10 years. The highest daily NAV is guaranteed in the first 7 years
Advantages
a) Additional allocation of 3% of Fund Value on maturity
Disadvantages
a) High allocation charges as compared to LIC and BSLI Platinum Premier Plan
b) Policy Admin charges are a percentage of premium and not absolute value as in LIC’s Wealth Plus. For eg LIC would charge Rs. 60 and Rs. 25 (increasing at 3% every year after that) in the first and second year respectively for an annual premium of Rs. 20,000. The allocation charge in case of ICICI Pru is Rs. 120 every year. This increase as premium increases but in case of LIC it would remain constant.
c) ICICI Pru inspite of charging Mortality Charges pays only Fund Value or Sum Assured (whichever is higher)
BSLI Platinum Premier Plan
This plan allows investing the first three annual premiums in a Platinum Premier Fund which comes with guaranteed highest NAV during the first 7 years and 3 months. The premium paid in this plan is paid for the policy term (10 years) and after 3 years the investor can choose any 10 plans of his choice to invest the remaining premiums. The investor can withdraw the amount invested in Platinum Premier after 3 years and invest in any of the 10 funds. The highest NAV is guaranteed only for the units which are not withdrawn from Platinum Premier Fund.
Advantages
a) Monthly premium payment option available
b) Fund Value plus 5% of every premium paid is refunded on maturity
c) 10 Options to choose including investment in Equities
Disadvantages
a) BSLI Platimum (like ICICI Pru) pays only Fund Value or Sum Assured (whichever is higher) even after charging Mortality Charges on death of the insured
b) The premium invested in Platinum Premier Fund is only available for guarnteed NAV
Conclusion
Having analysed all the three plans in detail, one can conclude that the guaranteed NAV is nothing but a marketing gimmick as the investment details of the Fund are not known. One can easily guarantee highest NAV if one invests in Debt instead of Equities.
As these funds are portrayed as Equity Funds, its better that an insured invests in an ELSS which provides tax advantages like these insurance product.
If one still wants to invest in such a product then LIC’s wealth plus offers to be a better product in this category
