HDFCLife Sanchay Review

Posted by Admin on 3


HDFCLife Sanchay offers guaranteed addition but return on investment is very low. Guaranteed addition comes with heavy cost. Policy provides flexible payment terms of 5, 8 and 10 years. Policy term can be between 15 to 25 years.



Policy conditions:

Min- Max Entry Age (years)

         30 days*

        45                

Min- Max age at Maturity (years)

              18            

        70

Premium Paying Term (years)

                           5, 8 and 10

Min –Max Policy Term (years)

              15

         25

Min Yearly Premium

30000


Guaranteed additions

8% of SA for 15 - 19 years term

9% of SA for 20-25 years term
   
Guaranteed addition:
Policy offers GA as percentage of Sum Assured. For policy term 15 – 19 years, guaranteed return is 8% of SA and 9% of SA for policy with terms 20 – 25 years. For e.g. If SA is Rs. 500000 and Policy term is 15 year: GA will be Rs. 40000 PA.
Maturity benefit:
On Maturity Sum Assured + Guaranteed Addition is paid. If we take same case as mentioned above, maturity amount will be 500000 + 600000. (40000*15) = Rs. 11, 00000. Maturity benefit will be higher for long-term policies.

Death Benefit:
It will be higher of (Premium amount excludes tax and extra premium paid.)

  1. SA
  2. 10 times annualized premium
  3. 105% of total premium paid.
Policy surrender:

Surrender is allowed after paying

  • 2 years premium (PPT 5 and 8 years).
  • 3 years premium (PPT 10 years).
Returns:
If we go by the illustration provided in the policy broacher, Policy offers compounded returns of close to 4.75%.  For a person of 35 years age, the premium is Rs. 1, 23, 125 for the term of 15 years and PPT of 5 years (excluding tax). In total in first five years, he will end up paying Rs. 615625. On maturity, he will get Rs. 11, 0000. If we do not bring the complexity of Guaranteed addition of 8% of SA in the calculation, the compounded amount @ 4.75 is 6, 83,260. If the same amount is invested for next 10 years, @ 4.75 % compounded return, the maturity value is close to 11, 00000. If we account for the service tax in the total premium paid, the effective return is less than 4.75%.

Premium
Total Premium
Total after 5 years @ 4.75%
123125
615625
683260


Total Premium
Investment
Total Maturity
615625
683260
1100000

Conclusion:
One should stay away from guaranteed addition insurance policies. I already have provided review on Aegon Religare Guaranteed Growth plan. Return is very low and is close to bank saving account rate. Only extra  benefit such policies offer is insurance cover. There are plenty of term insurance products available to cover life. other negative aspect is high surrender charges. 

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3 comments:

Kunal said...

Thanks for the review. I understand the investment. But Can you recommend a policy I could invest in to save tax under 80C? I was planning to a 5 year FD, HDFC confused me with this policy.

I want a fixed income, and save tax at same time.

Admin said...

Tax saver fd provide post tax return better then this policy. I suggest tax saver FD. Beside this , money will be locked only for a period of 5 years. No other tax saver fixed income instrument comes with such low lock in period.

Rajeev said...

Your numbers are pretty close and it looks to be an accurate review on return.

Do think any product from HDFC Life, which gives decent guaranteed return?

Waiting and appreciate your response.

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