This is another post from the Suggest a Topic page, and today I’m going to look at some features of the ICICI Prudential Guaranteed Savings Insurance Plan.
The ICICI Pru Guaranteed Savings Insurance plan is an endowment life insurance plan, and it gives you life insurance cover plus a certain amount at the maturity of the plan.
This plan falls under Section 80C tax saving schemes which means the premium payable will be applicable for deduction from your taxable salary under section 80C.
I find that the easiest way to explain how this plan works is to take an example of one option with certain figures and go through it. Let’s use the same example that they use in their benefit illustration page.
Let’s say you choose the 15 year term policy and decide on a premium of Rs. 25,000.
First thing to keep in mind is that in this option you have to pay premiums for the first 7 years, but you get the money at the time of maturity which is at the end of the 15th year. The good part about this is that your insurance cover lasts for 15 years as well.
So, how much is the insurance cover?
Insurance Cover = Annual Premium x Number of Premiums
In this case – 25,000 X 7 = Rs. 175,000.
From the sample term insurance post – you know that this is not much and you can get a cover of as much as Rs. 50 lakhs with an annual premium of Rs. 5,000 or so.
However, this is one benefit you do get – so keep that in mind.
Now, the next and slightly trickier part – how much money do you get back?
You will get your money back at the time of maturity so in this case at the end of 15 years, and they have split how much you get in three buckets.
- Premium Payment: This is simply the sum of premiums that you have paid, so your own cash, and this forms part of the guaranteed payment they talk about.
- Regular Additions: Every year, they will declare a certain percentage of the sum assured that will be added to how much you receive back from them. From the past numbers – I see that this is around the 4% mark, so in our case 4% of Rs. 1,75,000 or Rs. 7000 will be added to what you get at the maturity. This will be added throughout the term of the policy, so in our case – 7,000 x 15 = Rs. 1,05,000. This is also part of what they consider the guaranteed payment. So, the guaranteed total is Rs. 1,75,000 + Rs. 105,000 viz. Rs. 2,80,000.
- Maturity Benefit: On top of the two amounts above – they will also give you a maturity benefit, but this doesn’t fall under the guaranteed category. I think this means that they are not obliged to pay this amount, however in their illustration they have shown this to be Rs. 74,292.
If you sum up these three amounts – you will get a value of Rs. 3,54,292.
So, under the ICICI Guaranteed Savings Insurance plan, if you were to pay Rs. 25,000 for 7 years, you may get Rs. 3,54,292 according to the illustration that they have shown. Note that the only number that you can be certain of in this calculation is the premium because that’s an absolute, and they will return that.
For the Regular Additions amount – they will pay you a percentage that’s at least half of the 10 year G-Sec and so far that’s hovered around the 4% mark, and from their documentation I couldn’t find anything about the maturity benefit, but at least for this illustration they have used the same rate as the regular addition so let’s just assume that you will get that.
Now, that I have this number – I want to know at what rate should I invest my money myself to reach this target. Let’s choose a conservative number and say that I can only grow my money at 6% per year.
Now, I use the compound interest calculator at MoneyChimp and find out that if I were to invest Rs. 25,000 every year and grow it at 6% – at the end of 7 years I will have about Rs. 2,20,000.
I also used the RD calculator to see how much I will get if I were to get a recurring deposit for 7 years with Rs. 2083 (25,000 / 12) every month for 84 months (years) and that gives me about Rs. 2,16,000.
So, let’s say using these conservative numbers you invest your money for 7 years. Then take Rs. 2,20,000 and do a fixed deposit at 6% for the remaining 8 years. The same calculator shows that I will get about Rs. 3,50,000 at the end of the term.
This shows me that even this conservative interest rate of 6% earns you enough to match the returns indicated by the ICICI Prudential Guaranteed Savings Plan, and in my opinion a cover of Rs. 1,75,000 is not a big enough amount to sway your decision.
Having come this far – the last thing to see is what happens if you want to cancel the policy mid way because that seems to happen a lot.
The brochure says that if you pay the premium for at least 3 years then the policy acquires surrender value, which I take to mean that if you cancel before that time period you don’t get anything at all.
Then to calculate the surrender value – you have to see the higher of the two:
- Guaranteed Surrender Value: This is 35% of the base premiums paid minus the first year premium. So if we go back to our example and say that we want to cancel after the 4 installment. Then 35% of 1,00,000 is Rs. 35,000 and if you reduce the first premium from that then you are left with Rs. 10,000 only.
- Non Guaranteed Surrender Value: This is the present value of the paid up sum assured discounted at the gross redemption yield at the review date immediately preceding the date of surrender, plus 2% annum. Quite frankly, I don’t know how to calculate this or even what this means, I can only hope its close to the money you have already paid but that’s probably not how it is.
I’ve covered all the features that caught my eye, and tried to be as comprehensive as my understanding permitted. If you’ve come this far going through the whole article – the decision makes itself.
If you see any inaccuracies or mistakes in understanding then please let me know, and of course as usual everything that you have to say is welcome.
Sir actually i want to get some information….according to your plan of saving suraksha…we have accepted the plan of 10 years…at the premium of 25,000 yearly…we paid the 5th premium this year…now we want to withdraw the amount…how much we will get…will you please notify me…
Hello All,
Thanks for sharing your thoughts. Except Gautam all are saying that this is not a good policy. Even I agree, but I have already paid premiums for 4 years, and so I feel it is better to pay the remaining premiums and wait for the 15 yrs to complete. This will at least save whatever money is due after RA. As rightly said this is a predatory type of policy and a BIIIG lesson in managing ones money/finances.
Hi, taken this policy in 2011. Annual premium being paid is Rs.1,00,000/-. Can you take me through as to how much will be received after 15 years.
Hi, I have been continuing the ICICI GSIP since 2011 Sept. Since I am in need for some urgent money I want to close the policy. If I pay the premium this year I would complete 7 years. Can anyone help me in understanding how much I would get if I surrender now or after paying 7 years. I am paying a premium of 30000/anum.
Hi,
I have been continuing this policy for last 6 years since don’t want to loose the lot of money. I am paying 50,000 /years so for the RA amount in my account is 1,20,000 which is lower than what i get from the bank interest. so for no update on the GA. gent has reported that this policy has stopped and they are not issuing to any customers now.
Hi,
I have taken the ICICI GSIP 15 years plan in 2016 April . I have paid the first payment of Rs. 20000/- But due to financial problems, I’m not able to continue with this plan now and wont be able in future too. So please guide me to claim my first premium amount back.
Thanks & Regards,
Reply
I have started ICICI pru saving Suraksha plan.
Yearly premium=36000, Premium Term=7 years, Policy Term=12 years
So My question is how much I will get after 12 years maturity?
ICICI agent told me it will be double amount of my 7 years total premium
Please suggest
What will be the tax liability of ICICI GSIP maturity returns. In case withdrawn half the period before maturity the returns are negative.
I am in the same boat. Have invested so much that cannot come out. As we saw above, we will be lucky if we get regular savings bank account interest rates.
Wonder why such predatory unfair policies were allowed to be in the market. It is true we should not have believed the sales people and bought this policy. But, I feel this was unfair and predatory of a large company to aggresively push such a consumer unfriendly policy. Low returns and very low liquidity. Hard to recommend ICICIPru to friends.
Cancelling is not an option. After 3 years, you may surrender buy you get 1/3rd of what you have put in. When I tried to surrender, here is the math they sent me: In regards to your concern pertaining to the surrender, please note that the policy will acquire a surrender value on payment of premium for at least 3 policy years. On discontinuing the policy you will be entitled to a surrender value which is the higher of the Guaranteed Surrender Value (GSV) and Non-Guaranteed Surrender Value (NGSV).
Guaranteed Surrender Value (GSV): The Policy will acquire surrender value only after completion of three Policy years and subject to payment of premiums for three full Policy years. No benefit shall become payable under the Policy if premiums are not paid for three policy years. The guaranteed surrender value is equal to thirty five percent of the premiums paid, excluding a) the premiums paid for the first policy year and b) all extra premiums paid, if any, under this Policy. The surrender shall extinguish all the rights, benefits and interests under the Policy.
Yearly Premium 197,516/-
Total Base Premiums Paid (a) 776,000/-
(less) 1st year annual base premium (b) 197,516/-
Balance Premium (a-b) 578,484/-
35% of Balance Premium = GSV 202,469.4
Non-Guaranteed Surrender Value (NGSV): The non-guaranteed surrender value will be calculated as the present value of the PUSA, discounted at the GRY at the Review Date immediately preceding the date of surrender plus 2 percent per annum. The surrender shall extinguish all the rights, benefits and interests under the Policy. On surrender, the Company shall pay GSV or NGSV, whichever is higher.
The NGSV = Paid-up Sum Assured / (1+ Gross redemption yield +2%)^((Policy term in months– Number of completed policy months) /12)
• Paid-up Sum Assured (PUSA) = (Sum Assured + Regular Additions accrued till date of surrender) X Number of months for which premiums are paid / Number of months for which premiums are payable
• GRY = Gross redemption yield as on last review date
For the said case the PUSA is (13,58,000+ 173,824)*48/84 = Rs. 875,328/- and the current quarter GRY = RA for that quarter * 2 = 3.90% *2 = 7.8%
As requested and considering the above value arrived on PUSA and GRY, please find below the calculation for NGSV:
NGSV = 875,328/ (1+7.8% +2%)^((180-36) /12) as on January 15, 2016 the payable surrender value is Rs. 285,064.24/- for the said policy
I am also in the same boat. I have paid 3 installments of 30k/yr, however I am considering stopping payment of any future premiums. The key feature document says”
Your policy will acquire a surrender value on payment of premium for at least 3
policy years.
If the policy has acquired a surrender value and no future premiums are paid,
the policy may continue as a ‘Paid-up’ policy for a reduced Sum Assured (Paidup
Sum Assured), as indicated below:
Paid-up Sum Assured (PUSA) = GMB X (Total number of premiums paid /
Total number of premiums payable)
The policy will however not be eligible for any further RA. In case of death, the
nominee would receive a reduced death benefit which is equal to GDB X (Total
number of premiums paid / Total number of premiums payable).”
In my case I would receive 114900 after 15 years! Can someone tell me if there are any other penalties on the policy for not paying up remaining 4 years and is it a better decision than discontinuing the policy?
viswa says: Hi
Hello Mr. viswa R, Welcome to ICICI Prudential web chat services, how may I assist you?
Executive says: Good Afternoon Sir,
Executive says: How may I help you?
Executive says: Please proceed with your query
viswa says: I was informed the bonus so far is 8k
viswa says: policy term 10 years
Executive says: Are you an exiting customer of this policy?
viswa says: in death benfit it was informed 5 percent ofSA
viswa says: whether i will get bonus amount in the death benfit or not?
viswa says: i am planning to take one more policy
Executive says: Sir, May I know the complete plan name?
viswa says: Gaurantee saving insurance plan
Executive says: Okey Sir,
Executive says: Please give me a minute, I will check that for you.
VISWA SAYS: TO MAKE IT SIMPLE, TOOK ICICI GAURANTEE SAVING INSURANCE PLAN. WHETHER WE WLL GET THE BONUS AMOUNT IN THE DEATH BENEFIT ? OR WILL RECEIVE ONLY 5 PERCENT OF THE ACCUMULATED PREMIUM AMOUNT
Executive says: My system is taking a little longer to provide the required information. Please give me a minute more.
Executive says: This plan has been discountinued
Executive says: Is there anything else I can help you with?
Executive says: Awaiting response
viswa says: why
viswa says: ICICI Pru Guaranteed Savings Insurance Plan
viswa says: i am paying 10k monthly
viswa says: why it is discontinued
Executive says: We regret to inform you that, we are not authorized to comment on the same.
Executive says: This plan has been discountinued for new customers
You may ask Insurance company bout how to surrender your policy.
Buyt Personal Accident Insurance from a General Insurance Company covering TTD and Term Plan from a life Insurance company. Buy a Health Insurance plan oif you are not covered by your Company.
Open a Bank recurring for One to Five Year Goals.Do a Mutual Fund SIP for Goals more than 5 years.
Hi Vishal, Vikrant,
Did you get answer to your questions? I am also sailing in the same boat. my 3rd yr premium is due and i m in dilemma of whether to continue or not. What about the last 2 yr premiums. Shall i simply forget them and do sensible investment next time?
took the policy in 2010. When I ask the customer care people , what is the accumulated bonus so far. They are saying , as per policy we are not suppose to disclose. My policy is going to get matured on 2030. I have to wait till 2030. I remember 2017, 2028 I use to see the annual bonus in the icici prudential website after login. Now it is not not displaying. Lic is better. Every year they send the bonus letter to our house. Icici prudential guarentee saving insurance plan is worst.