is the latest ‘guaranteed returns’ plan on the block. Launched on 7th March, 2011, the policy involves a policy term of 30 years and a premium paying term of 15 years and guarantees you an income for 20 years. Under this policy, you are covered for an entire duration of 30 years, i.e. the policy term. Let us run through the features of the subject policy to understand it in entirety.
-Guaranteed returns of a percentage of sum assured staring from 10th policy year onwards as below:
Premium bands –
Assured Annual Income
Up to Rs. 24,999 – 9.10%
Rs.25,000 to RS.74,999 – 9.60%
Rs.75,000 and above – 10.10%
-The sum assured is 10 times the premium paid.
-In case you stop paying premiums after the 3rd policy year, the policy will be considered paid-up and you will continue to avail the benefits.
The sum assured would reduce to : (No. Of years the premiums paid-1)/ (No. Of years of premiums payable during the entire term-1)*basic sum assured.
-Guaranteed returns would be payable for 20 policy years.
-Life coverage is available for the entire policy term of 30 years.
-If the insured is a minor and death occurs before attaining an age of 18 years, then the sum assured applicable is the sum of all premiums paid up to the date of death.
-Age at entry: 0 to 60 years
-Age at maturity: 30 to 90 years
-Min and max premium: Min. – Rs10, 000 p.a. and max, has no limit. However the maximum amount always depends on financial and insurance underwriting norms.
The plan gives you a flexibility of additional protection by availing the benefit of riders by incurring a marginal addition cost. Following are the riders available:
-Kotak Accidental Death Benefit
-Kotak Permanent Disability Benefit
-Kotak Lift Guardian Benefit
-Kotak Accidental Disability Guardian Benefit
These riders are available to you at a minimal cost and give you an additional protection.
You have the flexibility to choose your premium paying modes as annually, half-yearly, quarterly or monthly. You can change your premium paying mode on policy anniversary.
-Maturity benefit: Along with the guaranteed returns for 20 years, the plan also returns you a lump sum of 110% to 104% of the basic sum assured, calculated as (110%-0.1%* age of entry), i.e. for a 30 year old, the survival benefit at maturity comes out to be 107%.
-Death benefit: In case of your unfortunate death during the policy term, the nominee will receive the basic sum assured.
Withdrawals are not allowed under the policy.
After three policy years complete, you can avail a loan against your policy, and the maximum amount of loan would be up to 80% of surrender value and the rate of interest will be declared by the company from time to time. The minimum loan amount applicable is Rs.10,000.
On completion of three policy years, it acquires a Guaranteed Surrender value of 30% of all premiums paid to date, excluding the first year’s premium and rider premiums. If surrendered after three years, an addition value may be paid, on discretion of the company.
-If premiums are not paid for the first three years, the policy will lapse and no benefits will be payable.
-The lapsed policy can be revived within two years on basis of payment of outstanding premiums with handling charges. If done within six months no ‘proof of good health’ is required but it would be required after six months.
REVIEW OF THE POLICY:
-A good thing about the policy is that returns are tied to the sum assured instead of premiums paid. So it makes it a ‘big payout’ policy at maturity and that’s the only factor that would make me buy this policy. Otherwise the guaranteed payouts alone would not be a much of an attraction.
-This is a regular premium paying plan and the single pay version is not available. So, the plan is not suitable for investors looking for one time investment opportunities. Also, this policy is unsuitable for investors with an irregular source of income.
-There is no facility of partial withdrawals under this policy. Although you can avail liquidity through loan, it comes at a cost which is 12.5% at present which is on the higher side. This policy would be suitable for someone who does not need an emergency funding through this policy. For investors looking for emergency funding and guaranteed returns, a guaranteed ULIP would be a better option, irrespective of the costs. In ULIPS
, partial withdrawals are allowed for as high as four times a year, and that too with no additional cost or penalty.
-No top-ups are allowed under the policy. If you desire to invest an additional amount, you would be stuck. Then you would have to look at other products to invest in.
-The other endowment plans in the market, for example LIC endowment plan gives you a provision to assure a sum of 25 to 30 times the annualised premium. In that case the sum assured as regards to the premium is quite low here. Considering such alternatives available in the market, the sum assured with respect to the premium is quite low here.
-This policy is suitable for conservative investors who are looking for more of capital protection rather than investment. After the changes in IRDA rulings as related to ULIPS, the market is bound to come out with similar other capital protection products. So it may be a good idea to wait for more such products to hit the market before jumping into this one.