Monday, January 6, 2014
Product crack: AEGON Religare iGuarantee Insurance Plan
The unique selling point of this plan is that it’s available only online.
What is it?
In line with the trend, this is a traditional insurance policy that guarantees periodic income to the policyholder after the premium-payment term is over. The unique selling point of this plan is that it’s available only online.
What do you get?
You pay a regular premium during the policy term of six years. From the end of the sixth year, the insurer will pay you an annual amount that’s equal to 135% of the annual premium. The insurer will pay this every year for six years. For instance, if you pay Rs.1 lakh as annual premium for six years, for the next six years, you will get an annual payment of Rs.1.35 lakh.
If the policyholder dies during the policy term—that is, during the initial six years—the policy will pay a sum assured or death benefit equal to 10 times the annual premium to the nominee. But if the policyholder dies during the benefit payment stage—that is, after the policy term of six years—the nominee would get the balance annual payments.
This policy is sold exclusively online. To buy it, you will need to fill up the proposal form and pay the premium. The policy will get issued immediately—this means the insurer will cover you right away. But you need to submit all the know-your-customer documents in the next 15 days before the insurer sends you the policy bond.
Mint Money take
Apart from the fact that this plan can be bought only online, the other thing that sets this plan apart from other guaranteed products is its rate of return—one of the highest in the category of guaranteed plans that offer fixed payouts.
For instance, if you invest Rs. 1 lakh in the first six years, the plan will give you tax-free Rs. 1.35 lakh for the next six years. This is a net return of around 5%. Most other plans that offer guaranteed payouts offer a net return of around 4%.
In comparison to other insurance plans in the same category this plan is better, but is it good in the wider universe of financial products? A 5% guaranteed return over an investment horizon of six years is nothing to write home about. Remember that inflation would eat into your returns, that means you may actually end up destroying the value of your investments.
We would recommend that you focus on a combination of debt products such as fixed deposits, Public Provident Fund and tax-free bonds instead of this insurance plan. You should consult a financial planner who will help you structure your investments well. But if you like the convenience of just one product, then invest in this plan. You must, however, remember that you are bringing home sub-optimal returns.