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.
Iam asking about icici guaranteed savings insurance plans
Iam putting 2539 per month so it comes to 30000 per annum and I have already completed 4 successful years. Can I quit the policy after 7 years ? Will I get the amount and benefits what I invested for 7 years?And if got then what amount I will take home after 7 years ? Any one Pls let me know in details.
I want to surrender my ICICI policy. Can somebody answer this question? What is “Present Value of Paid Up Sum Assured, discounted at the Gross Redemption Yield at the Review Date immediately preceding the date of surrender, plus 2% per annum.” How much will I get back if I cancel in a few days? In May, my 3 years will be up and I would like to cancel my policy then. How do I go about it?
As the admin of this website is working, no hesitation very shortly it will be well-known, due to its quality contents.
Dear ,
Please advise me, I had already invested in ICICI pru GSIP policy RS 20,000 for last 2 years,pleas let me know ,how shall i come out of this policy?
Or Shall I pay or 3rd Year premium and they ask for closure o this policy?
Thanks
Vishal.
investment is not insurance!
insurance is not investment!
surendra
This is very bad policy.
Icici make fool to their costomer. I have a policy of 50000 per annum, the agent told me that it will give return aprox 3 times of sum assured,but it will give only 6% compound intrest on sum assured.
second thing agent told me that it will give life cover of 10 times of 1 year premium in case of death(also Mr Gautam mention above),but in brochure it gives only 5%of compound intrest on total premium paid till date of death,that means if I will died in 3rd policy year it will give only 165000,which is not 10 times of my yearly premium.
They send the policy detail on the wrong address,and I got details after 2 month, now I can not stop the policy,and return back my money.because policy stop days is only 15 .
I suggest you …dont buy this policy ,its worst, they make fool in name of insurance,
my agent response is also very bad, he not correct my address detail till now.
Dear alls frnds,In my opnion most of icici agent selling icici product as same way of as per broser,but right thing is that no can predict that RA rate is same 4%,because our GDP grouth rate is very slow.also MA rate is not gaurented in this plan its showing as per calculation bases of IRDA perpuse only.as per my opinion this is a waste money…
as per broser details:“If your policy offers guaranteed returns, then these will be clearly marked “guaranteed” in the Benefit Illustration on this page. These assumed rates for the RA and the MA are projected assuming a gross interest rate of 10% for this illustration only. The maturity benefit of your policy is dependent on a number of factors, including future performance.”
If some any investor has tacken this plan then yu have option to bye back your invested money.
Free look period: If you are not satisfied with the terms and
conditions of this policy, please return the policy document to the
Company for cancellation within
15 days from the date you received it, if your policy is not sourced through
Distance marketing*
30 days from the date you received it, if your policy is sourced through
Distance Marketing*
On cancellation of the policy during the freelook period, we will return the
premium paid subject to the deduction of:
a) Stamp duty under the policy
b) Expenses borne by the Company on medical examination, if any
The policy will terminate on payment of this amount and all rights, benefits
and interests under this policy will stand extinguished.
hi,
I was weighing my options and decided on investing in Sriram Transport but my relationship manager talked me through GSIP and according to him it would fetch me the same rate of 9 to 10 percentage. Please advise me on where should I put my money.
Your RM is taking you for a ride due to his commisions! First kick him out.
Hi,
I have invested in the Icici GSIP in .Plz..advice
Hi,
I have invested in the Icici GSIP in Jan 2013. I have already paid a monthly premium of 11000 for 5 months. But after reading your analysis I now feel I haven’t made the right choice. Would like to know if I should discontinue it right away? Please advice…
Hello!
Debt funds for Investment.
period One year – SBI Magnum Income Fund – Growth(13%)
Period Two or more Years – Birla Medium term debt fund(11.46%)
They didnt said you about the service tax?
@of 3%, service tax will be levied.
pl suggest good investment plan
A good investment plan is as follows: Invest In Birla Sunlife Rajiv Gandhi Equity Scheme.
which gives you the opportunity to create wealth with shares of handpicked Top 100 companies and PSU Navratnas, Maharatnas and Miniratnas. What’s more, this scheme can offer first time investors a unique tax saving opportunity under section 80CCG of Income Tax Act, 1961. This means that you could now have a chance to save tax over and above Section 80C.
You can get tax benefits for a maximum investment amount of Rs. 50,000/-. 50% of the invested amount, i.e. Rs. 25,000/- in case Rs. 50000 are invested, is eligible for tax saving thereby helping you save Rs. 5150/-. (Assuming the qualifying amount of deduction is Rs. 25,000 and the investor falls in the Income Tax slab of 20% and includes applicable cess)
You will not need a Demat A/c if you are not looking to save tax.The issue is open till 20/03/13
Pl. sugggest good investment plan
Pl. suggest good investment plan where there is no insurance affect.
if invest 50000 gsip plan how much i got ….. after 15 years
It can’t be said because part of this money is in variable returns. Please read the article above to understand this properly.
You can view it in simple way.Do you want Insurance cover? Then Go for a simple and easy plan.i.e. Term Plan.
Do you wish to invest with Tax Benefit – Go for PPF. You can calculate how much interest you can earn.For Example, If you will Deposit Rs. 50000 on any date between 01/04/13 to 05/04/13, then you will earn Interest rs. 4400 at the end of the year. i.e,31/03/14.It is compounded yearly.So Your deposit amount for the next year will be Rs. 54400 and so on.One more benefit is that you are automatically planning for your retirement also as PPF is a long term plan(16 yrs) and can be continued in Multiple of 5 yrs thereafter for any period.
Rajiv Gandhi Equity Scheme is the best for you as it gives tax Benefit under 80CCG.
You can indicate your E mail ID here in case you are interested in knowing more.
Hi,
I have taken the ICICI GSIP 15 years plan in 2011 oct. 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,
Vijay
Thanks very much for your comments Suresh!
Manshu,
I really appreciate your opinion in this regards.
What would be other investment products for me? How do you suggest I accumulate the money?
MP