SBI Life’s SMART ULIP: Review

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Slowdown some times brings innovation and life insurance industry is the biggest example here.

During the boom ULIP plans were the great success but as the economy started slowing people have started moving back to traditional investment instruments; due to this insurers were forced to bring innovation in the ULIP and then comes capital guarantee ULIPs like ICICI Invest shield.

After Capital guaranteed ULIPs now is the time for ulip which guarantee you the highest NAV during the term.

For eg. If the NAV during the period of 10 years were Rs. 10, 12, 11, 15, 14, 18, 16

Then on maturity instead of paying maturity amount based on Rs. 16 you will be paid on the highest NAV that is Rs. 16.

After Tata AIG LIFE invest assure apex, SBI Life’s SMART ULIP bring the same features with little differences,

Let us first review SBI Smart ULIP, and then in the next post we will compare both the products.

How it works:

The term is divided in to 4 phases.

1) Subscription phase:

This ULIP is for limited period and would be open for 12 months during which new investment is allowed.

2) Premium payment phase:

There are two terms either you opt for 3 years Premium payment or 5 years premium payment term.

3) NAV builds up phase:

This will last for 7 years from the date of launch.

4) Accumulation phase:

Last 3 years are falls under Accumulation phase.

Maturity date would be at the end of 10th year.

Funds:

Total 2 funds are available.

1) Money market fund: initially your money is invested here till the reset dates; here maximum of your amount is invested in debt and money market instrument where risk on investment is low.

2) Flexi Protect Fund: After reset dates your money is moved to this fund, to provide high return money is invested in combination of equity and debt instrument.

Premium paid after deducting allocation charges will be invested in the “Money market fund”

On reset dates (Which will be 8th and 23rd of each month) investment will be moved to “Flex Protect Fund”

Now Guaranteed Maturity NAV will be the highest of 168 NAVs of reset dates of first seven years based on which maturity amount is paid.

Maturity Benefit:

Fund value or Guaranteed Maturity NAV whichever is higher.

Death benefit:

Higher of fund value or Sum assured.

Sum assured would be 5 times of annual premium.

Charges:

Premium allocation charges:

3 years

5 years

1st year

15%

15%

2nd – 3rd year

5%

5%

4th – 5th year

5%

Policy Admin.. Charges:

Rs. 60 per month during he term and for first 3 years additional Rs. 5 per 1000 SA.

Fund mang. Charges:

For FlexiProtect fund it is 1.50% p.a.

For money market it is 0.25% p.a

Surrender charges:

Surrender is allowed after 3 years and surrender value would be percentage of fund value.

1st years: 20%

2nd years: 12. %

3rd years: 9%.

4th years: 2%.

5th years: NIL.

Partial withdrawal allowed after 5th year.

Conclusion:

Anything which provides you higher of NAV specially from equity market is always worth investing but the negative part here is last 3 years that is Accumulation phase during which NAV might fall to lowest level(within a year our sensex is down around 70%). But one may have the option to surrender after 5 years without any surrender charges. On and all a nice product with few minus points like higher allocation charges and no facility to reduce first year premium.There will be two reset dates in a month which is also a positive side of this plan.

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2 comments:

vicky said...

SBI Life SMART ULIP a nightmare of charges

Dear Friends,
PLease dnt get caught with the catchy line of SMART ULIP from SBI, please see the Benefit Illustration.
Just to give you a snapshot considering we go for a 50000 premium 5 year plan for a male of 30 years and you will realise that u spend a whopping 11.5% only against charges such as Policy Administration, premium allocation, sum assured and mortality other than the fund management charge (which is also quite high aprroximately 11.5 % again at a conservative interest rate of 6%) so u actually end up spending 55000 - 57000 only against charges in your 10 year term.
Now for all those investors who want to invest or have invested for the purposes of getting tax free returns by 10(10 D), u have already lost aprrox 22% into charges in your ten year term and your yield thereby decreases....suggest to put directly into Top performing Mutual funds and in Ten years you will get much better yields for the same investment even after 30% tax incase you have to pay over your returns.

Bhargav said...

Hi Vicky,
You are right as far as charges of ULIPs are concerned they are very high, however it is visible because they charge it upfront, MF also takes away portion of (one of them is entry load which is discontinued now however) your money but they don't do it upfront and hence it is not visible, otherwise they too have fund admin and various other charges.

IRDA has asked insurers reduce the charges w.e.f. Oct'2009 ,because of this your retun on investment in ULIP will increases.

Please visit http://lifeinsureinfo.blogspot.com/2009/08/ulip-now-with-lock-in-of-5-years.html

Each of the investment instrument has their own merits and de-merits.
And it is unfair to compare MF and ULIP.

Please also visit ULIP section of my blog

http://lifeinsureinfo.blogspot.com/search/label/ULIPS which will help in understanding +ve and -ve of ULIP.

Thanks,

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