This is the third guaranteed returns product that I’m looking at here in the past two weeks, and I’m quite embarrassed to admit that I can’t understand how this product works.
I’ve tried to explain what I’ve understood of it but I’m certainly open to comments from people who understand this better than me.
Premium Payment
Let’s start with the thing that is amply clear, viz. the premium payment term is 10 years regardless of how long you take the policy for.
Policy Term
So you pay premium for 10 years, but you can take the policy for 10, 15 or 20 years.
Survival Benefit
At the end of every five years (except for when the policy is maturing) you get 125% of the annual premium if you survive, which is called ‘Survival Benefits’ in insurance jargon.
Guaranteed Additions
There is this thing called guaranteed addition in this product and what they do is add 7% of the annual premium to the survival benefit at the end of the 5th year, 8% at the end of the 10th year, and 9% at the end of the 15th year.
However, if I’m reading this correctly, they don’t actually pay you these guaranteed additions at the end of the 5th, 10th or 15th year, rather these additions accrue to you, and you need to wait for maturity to get these benefits.
Maturity Benefit
At the maturity, they give you the sum assured plus your guaranteed additions minus the payments they have already made to you during the course of the policy.
I think if you took a 20 year old policy, this is how your payments will look like at various years. The product brochure says that for a 35 year old, the sample premium for getting Rs. 1,00,000 insured is Rs. 6,585 which is what I have taken.
| Year | Premium | Survival Benefit | Guaranteed Addition | Maturity Benefit |
| 1 | Rs. 6,585 | |||
| 2 | Rs. 6,585 | |||
| 3 | Rs. 6,585 | |||
| 4 | Rs. 6,585 | |||
| 5 | Rs. 6,585 | Rs. 7,408 | Rs. 461 (7% of premium) | |
| 6 | Rs. 6,585 | |||
| 7 | Rs. 6,585 | |||
| 8 | Rs. 6,585 | |||
| 9 | Rs. 6,585 | |||
| 10 | Rs. 6,585 | Rs. 7,408 | Rs. 527 (8% of premium) | |
| 11 | ||||
| 12 | ||||
| 13 | ||||
| 14 | ||||
| 15 | Rs. 7,408 | Rs. 592 (9% of premium) | ||
| 16 | ||||
| 17 | ||||
| 18 | ||||
| 19 | ||||
| 20 | Rs. 1,00,000 + (Rs. 461 + 527 + $s. 592) – (7,408×3) |
I’m quite uncertain about the guaranteed addition in this product mainly because I’m unable to understand if they are going to give you 7% of the premium at that year or will they add that 7% for every year that you have held that policy? Similarly for 8% and 9%?
Usually, I shy away from writing about products where I have so many questions myself but I see that almost every website that has written about them has reproduced the press release with a few edits, and don’t do much to advance the discussion.
I hope this will post will at least arm you with the right set of questions to ask your agent if they approach you to sell this product.
I disagree, FD and insurance are two different asset class and comparing the two would be wrong. Hence the plan mentioned above that is AVIVA dhan Samruddhi is a guaranteed plan that offers guaranteed returns.
this plan is for those who would life to make an investment with guaranteed return and also have an insurance coverage.
Term plan are altogether different plans hence they offer you coverage against small premium and they are different from Traditional plans line AVIVA Dhan Samruddhi.
Rgds !
I have generally noticed that any Life Insurance product that is complicated it always tilted heavily in favour of the corporation issuing the product. I have seen one of your earlier posts where you indicated that when you take a Life Insurance just go for a term policy and when it is investments look at other products like Mutual funds, Bonds, etc and not mix both. I completely agree to this concept of Insruance and Investment.
As far I have understood the product,I think you have taken Guaranteed Additions in wrong way.
In case of above example, For term of 20 years,guaranteed additions added will be annually, at the rate of 9% of the annual premium,accrued till end of period and to be paid along with maturity benefits.
Here,Company have tried to fool peoples by making use of word 9%…
I think its one type of promotion of mis selling to use such confusing or inappropriate units.
Investors should understand that generally bonus in Endowment plans is always paid on the basis of Sum Assured and so its lower around 4-5% of the S.A.and here its on the basis of premium paid.
So in this example would it be Rs. 592 x 20 times or something else?
Yes..I think it should be – 592 x 20…
This is either incorrect or an awful product. If I deposit 6,500 in an RD at 6% for 10 years, I geta round 85,000. Then I put the 85,000 in a 10 year FD again at 6% and get to around 150,000. And 6% is a conservative number but then 20 years is a long time.
Why would anyone opt for this?
Guaranteed products have all low returns as seen in my two other reviews, so to that extent this product is not the only one with those numbers.