A couple of weeks ago I wrote about SBI Life’s Smart Income Protect and a similar product was launched by Tata AIA recently in which you pay money for 12 or 15 years, and then it pays you a guaranteed sum for a set period.
This product is Tata AIA’s MahaLife Supreme Endowment Insurance Fund. Â Â
The idea is that you pay a premium for either 12 or 15 years, and then based on that the MahaLife Supreme plan will pay you for 18 or 20 years. There is an insurance component as well where they will give you a life cover of ten times the premium.
The annual payment that they make to you is also calculated as a percentage of your sum assured and has a tiered structure.
First, let’s take a look at the two key options of this plan.
| Plan Option |
Option A |
Option B |
| Max Entry Age |
55 years |
55 years |
| Policy Term |
35 years |
30 years |
| Premium Payment Term |
15 years |
12 years |
| Policy Pays You For |
20 years |
18 years |
| Minimum Premium |
Rs. 15,000 |
Rs. 20,000 |
An example of how the money will be paid out is given in the brochure of the product, and for Option A they have the following details:
Option A
| Age of the life insured | Annual Premium | Basic Sum Assured | Guaranteed Annual Income | Maturity Benefit |
| 35 years | 50,000 | 500,000 | Rs. 52,000 | 734,500 |
So in this example, you pay Rs. 50,000 for 15 years at the end of which the company pays you Rs. 7,34,500 and then for the next 20 years pays you Rs. 52,000 per year.
I created a spreadsheet to calculate the IRR for this it came out to be 4.2%. However, the assumption that I have made is that you get the maturity benefit at the end of 35 years (policy term) and not 15 years, which is the premium payment term.
If you get the maturity benefit at the end of 15 years then the IRR is an excellent 7 plus percent, and with the added insurance and tax benefits I would say that this is a good product. So if someone can clarify when the maturity will  be paid that will be great.
The tax benefit is that the premium is eligible under Section 80C and you can take advantage of that if you haven’t already exhausted the 80C limit.
This plan is quite similar to the SBI Life Income Protect but there are two key differences.
First, the lump sum payment is made earlier in SBI Life Income Protect than in this plan, where that plan pays the lumpsum at the end of the premium payment term, this plan pays it at the time of maturity.
The second difference is that in this plan you know what you will get paid right from day one, whereas in that plan there is a variable component so there is that bit of uncertainty of how much will be added to the variable part based on the company’s profits.
Finally, the big similarity is that they are both guaranteed income products so the returns are relatively lower as you’d expect, and as I said in the earlier post, you can’t rely on these type of products for insurance and at best, they can only supplement whatever existing insurance you have.
Do anybody know what would be the total payout if anybody passes away on 13 th or 14 th year of 15 year term ? Is it only the full premium only ? It is way below the amount accumulated if anyone saves periodically in a bank’s savings account.
Does the 15 year maturity plan really give an IRR of 7 % , that too tax free?? This is surprising , a endowment products usually have an average IRR of 5 %. I feel there much be a catch, and if there isnt, this plan is surely worth considering from a long term perspective,
I did not try to clarify from TATA AIA, but from the other links on web & opinion, it seems that maturity amount will be provided only after complete policy term (as per example 35 years). In this case IRR 4.2% is not a good return from investment side. The better option to buy a pure term insurance, which will cost you Rs. 3000/- approx for Rs. 500000 sum insured in the age of 30 to 35 years + invest Rs. 50000 every month in Recurring deposit assuming you will get 6.50% interest after deducting tax (as per current rates) & starting from 16th year you can withdrawof Rs. 52000/- every year same like this plan, at the end of 35 years you will get Rs. 23 lacs, which is 3 times more than this plan.
I think that 35 years should be the maturity term too and I’d be surprised if anyone else says differently, but just one of those things that I wasn’t sure about and makes a very meaningful difference if my understanding is incorrect.
I understand Kotak Life’s “Capital Multiplier Plan” is a better option
In what way is that better, is it the same guaranteed return plan?