Life time cover ploicy

Dear Readers,

Greetings from Ram Financial Consultancy, We are best in serving your needs from long time, we would like to give some idea about the whole life cover plans, first i would like to tell you one thing there are so many types of insurance plan, either it is endownment plan of unit linked plan it should match our requirement and it should yield good returns for us. There are lot of comments about the comparison of Endownment plan and Unit Linked Insurance Plan, but our ultimate goal is to identify the best plan which suites for us. Lets start our discussion, There are so many companies products which will provide while life cover (typically 100years insurance cover) , i would like to address hear about how to select best out of the available products in the market.
Lets start with comparison of two plans, one is Jeevan Anand form LIC (Life Insurance Corporation) and Other plan is Flexi Life Line form Biral SunLife Insurance Company Pvt. Ltd. Off course i will agree that Jeevan anand is endownment plan and Flexi Life Line is Unit Linked Insurance Plan, If you select Debt funds in the Unit Linked Insurance Plan, where there is 0% dependence on the equity markets, then you can expect a fixed returns on your investments with very less risk ( less risk means, your fund performance depends on the interest rate in the debt market ), In Endownment plan the bonus is also depending on the performance of the company which is again with less risk involved over ther.

Let go through the Details:

Jeevan Anand :

These details are taken form LIC web site, source from Jeevan Anand
This plan is a combination of Endowment Assurance and Whole Life plans. It provides financial protection against death throughout the lifetime of the life assured with the provision of payment of a lump sum at the end of the selected term in case of his survival.

Benefits in case of death during the selected term:
The Sum Assured along with the vested bonuses is payable on death in a lump sum.

Benefits in case of survival to the end of selected term:
The Sum Assured along with the vested bonuses is payable in a lump sum on survival to the end of the term. An additional Sum Assured is payable on death thereafter.

Accident Benefit:

An additional Sum Assured (subject to a limit of Rs.5 lakh) is payable in a lump sum on death due to accident up to age 70 of life assured. In case of permanent disability of the life assured due to accident this additional Sum assured is payable in instalments.

Supplementary/Extra Benefits:
These are the optional benefits that can be added to your basic plan for extra protection/option. An additional premium is required to be paid for these benefits.

Surrender Value:

Buying a life insurance contract is a long-term commitment. However, surrender values are available on the plan on earlier termination of the contract.

Guaranteed Surrender Value:

The policy may be surrendered after it has been in force for 3 years or more. The guaranteed surrender value is 30% of the basic premiums paid excluding the first year’s premium. Any extra premium(s) paid and premium(s) towards Accident Benefit are also excluded.

Comments: This seems to be not a good one in this plan, if a person want to quit the plan after paying the premiums for few years ( example @ 15th year) then he will lose lot of amount. we will see this illustration @ the end of this article. in the example case study

Corporation’s policy on surrenders:

In practice, the Corporation will pay a Special Surrender Value – which is either equal to or more than the Guaranteed Surrender Value. The benefit payable on surrender reflects the discounted value of the reduced claim amount that would be payable on death or at maturity. This value will depend on the duration for which premiums have been paid and the policy duration at the date of surrender. In some circumstances, in case of early termination of the policy, the surrender value payable may be less than the total premium paid.The Corporation’s surrender value will be reviewed from time to time and may change depending on the economic environment, our experience and other factors.

Case Study :For Example a per son with age 25 years take a jeevan anand policy for 21 year and coverage term as 100 years (whole life), let see hear how it works. You can calculate your premium from the URL : calculator

In this example the premium is coming to be around 49,522.00 per year but if you pay your premium half yearly you are premium per half year will go to 25,162.00 means which is higher than yearly by 802 Rs/-. in the same way this will go up if you pay Quarterly or monthly. this is for a cover of 10lakh.

we will take 49,522.00/- and see how it works out.

In case of survival:

Policy holder would be paying 49,522.00/- per year and for 21 years and survived then he will get 10lakh + Bonus ( this is uncertain which depends on the company performance this may works out to be less than 3% to 4% per year as per the information i got for the customer service representative of LIC), but in this case you are paying 1039962/- means you all ready loosed 39962 /- out of what you payed in this plan.

In case of surrender:

If the person is not able to pay the premium in regular basis then if he want to surrender this plan in 15th year (this 15th year is an example), then what is the Guaranteed Surrender Value he can expect is 30% of the basic premiums paid excluding the first year's premiums. in this case you are surrender value in 15th year is 193135.8/- means out of 693308 paid in 14 years you are going to lose 500172.2 (5lakh).

In case of death:

The Sum Assured along with the vested bonuses is payable on death in a lump sum.

Flexi Life Line Plan:

This plan is a combination of Unit Linked Investment Plan and Whole Life plans. It provides financial protection against death throughout the lifetime of the life assured with the provision of payment of a lump sum at the end of the selected term in case of life insured survival.

Benefits in case of death during the selected term:

Higher of ‘Fund value’ or ‘Guaranteed Fund’ or ‘Sum Assured’ less all applicable Partial Withdrawals in the 24 months preceding the death of the life insured.

Benefits in case of survival to the end of selected term:

A minimum guaranteed return of 3% p.a. applies on premiums and top-up premium, net of policy charges and survival benefits. This total will constitute the Guaranteed Fund Value. In case of survival higher of the ‘Fund Value’ or the ‘Guaranteed Fund Value’ (based on 3% net returns)

Accident Benefit (Accidental death and Dismemberment Benefit Rider):

There is option to add additional options like accidental death benefit in this plan, along with lot of other riders(riders means additional coverages).It provides 100% of coverage in case of death due to accident; loss of more than one limb or sight in both the eyes or in case of loss of one limb and loss of sight in one eye; 50% coverage in case of loss of one limb or sight in one eye. The coverage amount can go upto 5lakh depending on your requirement with the small amount of extra premium.

Supplementary/Extra Benefits:

You can further customise Birla Sun Life Insurance Plan by adding riders to the base plan at a marginal extra cost.

Term Rider: It provides additional amount of cover in the event of death of the life insured. ...Know more
Critical Illness Rider: It provides a cover in the event of life insured being diagnosed as suffering from any of four illnesses specified under the Critical Illness Rider. ...Know more
Critical Illness Plus Rider: It provides a cover in the event of life insured being diagnosed as suffering from any of the seventeen illnesses specified under the Critical Illness Plus Rider. ...Know more
Critical Illnesses Woman Rider: It provides a cover against several critical illness including woman specific illnesses. Pregnancy complications and congenital anomalies in a new born child. ...Know more
Waiver of Premium: This rider waives payment of future premiums on the happening of any of the unforeseen events as covered under this rider. ...Know more

Surrender Value:

The policy can be surrendered any time during the tenure of the policy. The surrender charges will be zero after the 4th policy year. In case of surrender in the first 3 policy years the benefits will be paid out only after the 3rd policy year. 0% Surrender charges are really good option for the people how can't continue the policy because of unexpected financial problems.

More details how surrender charges are calculated: The Surrender Charges are levied in the first four years and varies based on the duration of the Policy. During the first 24 months of the Policy, the charge will be an amount equal to the annualised Life Insurance Coverage Premium payable for this Policy. For the purpose of Surrender Charges only, annualised Life Insurance Coverage Premium is defined, as the amount that is payable if the Coverage Paying Period is equal to the Coverage Benefit Period. In the 25th month, the Surrender Charge is 24 percent of the annualised Life Insurance Coverage Premium. The Surrender Charge per cent reduces by one for every month thereafter. If the Policy is surrendered at any time after the 49th month, the Surrender Charge is zero.

The Surrender Value is calculated after deducting the Surrender Charges from the Fund Value.

Fund Options:

Individual Life - Protector : The equity component in Individual Life -Protector is 0% –10%. which means fund manager can invest upto 10% of money in equity depending on equity market conditions this could be 0% also.

The asset allocation for fund is given below:
Debt(G-Sec, Corp Bond & MMI)* : 90%-100%

Equities : 0-10%

*Includes Money Market Instruments upto maximum limit of 40%

Individual Life - Enhancer:
The equity component in Individual Life -Enhancer is 20% - 35%. The asset allocation for fund is given below:
Debt(G-Sec, Corp Bond & MMI)* : 65%-80%
Equities : 20%-35%
* Includes Money Market Instruments upto maximum limit of 40%

Individual Life - Builder:
The equity component in Individual Life -Builder is 10% – 20%. The asset allocation for fund is given below
Debt(G-Sec, Corp Bond & MMI)* : 80%-90%
Equities : 10%-20%
* Includes Money Market Instruments upto maximum limit of 40%

Fund Switches: Policy holder can switch between the fund twise between the funds for free in a policy year after that they will be charged with 100/- per switch between the funds iresepective of the fund value.

For more details about the plan click on Flexi Life Line Plan

Case Study:

For Example a per son with age 25 years take a jeevan anand policy for 20 years and coverage period as 100years ( which is whole life), let see hear how it works. If a person opts for 10 lakh as insurance coverage, then in that case the annual premium is 36000. In this plan policy holder can opt for any one fund option depending on his risk profile, low risk fund Protector can generate a fixed returns because of its debt fund investment options.

The following table is a part of an example of the illustartion generated.

* for clear image click on the table to view it as large image

In case of survival:

Policy holder is paying 36000 Rs/- per year, for 20 years he would have payed around 7,20,000/-. @ the end of 20th year this fund value is around 941092/- ( if your fund is growing @ 6%), 1476778/- if your fund is growing @ 10%. but there is one more option in your policy Guaranteed Policy Fund which is 767294/- (higher than what every you payed). the maturity value will be higher of all these.

Fund Performance is : NAV as on 1st Jan 2002 is 10.9688 and NAV as on 1st Jan 2008 is 17.5906 which means this fund gave a returns of 65.8129% from 2002 (10.9688% average growth per year after adjusting the fund management charges).

In case of Surrender:

Lets go with 15 years as i explained in the first example of the case study. In 14th year Guaranteed Policy Fund is 474472/-, if your fund is growing @ 6% CAGR then surrender value is 544377/- and if your fund is growing @ 10% CAGR the surrender value is 734398/-, lets go with the Guaranteed Policy Fund its 474472/- in 14 years you payed 5,04,000/- means you are loosing around 29528 which is less than your 1 year premium. but if i consider the fund value in that case you are not loosing any thing you are all ways getting more than what ever you payed, fund is growing with a fixed growth so policy holder can get more than what ever he payed in while surrender also.

In case of death:

Higher of ‘Fund value’ or ‘Guaranteed Fund’ or ‘Sum Assured’ so minimum amount nominee will receive is 10lakh.

Now lets make some table comparison of the plan:

values used in this table are used from the above case study.

Any individual who is seeking life insurance policy want to get the good insurance coverage for less premium and want his money to grow with less risk and more transparency. So i will recommend the Flexi Life Line Plan as the best one out of these two plans.

For more details please contact us

E-mail : sriram.adviser@gmail.com

Phone no : +91-9741598945 (India)