Bajaj Allianz Money Secure ULIP: High charges, poor guarantee

New ULIPs have a big ticket size. But Bajaj Allianz has come out with a small ticket plan with high charges

Money Secure is a regular premium ULIP that provides security for your investment with guaranteed maturity benefits. The selling proposition is a minimum annual premium of Rs7,000, which is low compared to premiums for new ULIPs that are commonly high.

The maturity guarantee of net cash flow (premium paid, less all charges) accumulated at 3% per annum is pathetic and will result in investments mostly in the debt market. The equity allocation of 0% to 50% means there will be times when nothing will be in equity and hence the returns will be average.
Pension ULIPs like LIC's Pension Plus offer 4.5% per annum guarantee on gross premium (not net of charges) and are a far better option for conservative investors than the Money Secure plan. Most insurers have avoided pension ULIP products since the new regulations, even though the 4.5% per annum guarantee does not seem much, because of the uncertainty of  interest rates over the long term of such plans.

Money Secure has premium payment term (PPT) flexibility. For a policy term of 10 years, it is 5 to 10 years. For a policy term of 15 years, it is 10 to 15 years. According to Rituraj Bhattacharya, head - product development, Bajaj Allianz Life Insurance, "The policyholder has to make an informed decision about how long s/he wants to pay the premium. If the premium payment term chosen is 12 years for a 15 years policy term in Money Secure plan, then the premium payment obligation on the part of the policyholder ceases on payment of the 12th year's premium and the policy will remain in force for 15 years." PPT flexibility will help to continue the insurance cover and remain invested without paying premium after the period of PPT till the end of policy term.

The premium allocation charge is 10% for years one and two, 7% for year three through year five and 2% thereafter. The policy administration charge is nil for the first five years of the policy and Rs25 per month thereafter, inflating at 5% per annum annually. There is also a guarantee charge of 2% of premium when received by the company. All top-up premiums have an allocation charge of 2%.

The plan also has seven optional riders. There is an option to decrease the sum assured to the level of 115% of the regular premium paid, subject to the minimum allowed under the product; such reduction shall be allowed at policy anniversaries only.

The minimum sum assured for age less than 45 years is 10 times the annualised premium and seven times the annualised premium for others. The maximum sum assured is 10 times of the annualised regular premium for policyholders who opt for riders such as critical illness, hospital cash benefit or family income benefit and 20 times of the annualised regular premium for others.

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    COMMENTS

    Madhusudan Thakkar

    10 years ago

    This type of BOGUS product will be sold by SUPER AGENT.Better products will be available on ONLINE platform."MALAI" will be eaten by company and "CHUTNEY" will be offered to SUPER AGENT."MEWA" will be also be eaten by company and SUPER AGENTS will give SEWA.
    LONG LIVE SUPER AGENT OF BAJAJ ALLIANZ.

    Two new low-cost online ULIPs from Aegon Religare, Bajaj Allianz

    Push products like ULIPs when sold online to net-savvy investors, without agents, aim to reduce costs. But while costs are lower, the fund performance can only be evaluated over time

    If you are looking for a regular or single premium ULIP with low charges, you could consider a new online product that has been launched recently. Aegon Religare's iMaximize offers the single premium option. However, the regular premium option does not have premium payment term (PPT) flexibility and the policy terms are 15/20/25 years. So, if one is looking for the flexibility to continue the cover without paying the premium after a specific number of premium payments, this may not be the right product.

    Another new product is Bajaj Allianz's iGain III. With this, a customer can choose a PPT of five years or up to the full term of the policy. The insurer will accept premium payments only till the PPT that is decided by the policyholder and continue the cover till the end of the policy term, as long as the premiums till PPT are paid.

    Both the products are designed to be sold online and without agents so as to reduce costs for net-savvy investors.


    Online ULIPs -

    iMaximize allows only four switches on investment options in a policy year. Beyond this, there is a minimum charge of 0.1% on the amount switched or a flat Rs500 for every extra switch, subject to minimum amount of Rs100 switched. iGain III allows unlimited switches with no extra cost.

    iMaximize offers the trigger portfolio strategy and the self-managed portfolio strategy. The equity component in one of the self-managed portfolio strategies (accelerator fund) is 80% to 100%. The trigger portfolio strategy moves from equity to debt periodically and will limit the returns.

    iGain III offers investors a selectable portfolio strategy and the wheel-of-life portfolio strategy. The maximum equity component ranges from 60% to 100%. The wheel-of-life portfolio strategy will reallocate your fund value among various funds in the proportion based on your outstanding years to maturity. It is fine for conservative investors, but the move from equity to debt will limit returns. Moreover, such a move at the wrong time in the equity cycle will not benefit from an equity upside.

    iMaximize does not offer any rider, while iGain III offers six different riders at an additional cost.

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    LIC’s Bima Account: You will make a capital loss over 9 years!

    Life Insurance Corporation of India has launched a new product, Bima Account, which offers liquidity, flexibility, transparent charges and guaranteed returns. But its performance has got to be among the worst, as you will make a capital loss for more than nine years

    Can a guaranteed return of 6% a year land you in a situation where you make a loss over nine years? Yes, if you buy LIC's newly launched Variable Insurance Plan (VIP) products Bima Account-I and II.

    The ads for these products are all over the print media. LIC is splashing full-page ads in The Times of India and other publications. According to the ad, the product guarantees returns of at least 6% per annum. Unfortunately, the ads conceal the most toxic aspects of the product.

    While a guaranteed 6% per annum is prominently advertised, there is no mention about the astronomical charges and the simple fact that 6% per annum is on the investment, net of all the charges! The charges are astronomical-27.5% in the first year, 7.5% in the second and third years and 5% each year thereafter, of the premium paid.

    The premium you pay for 10-15 years (policy term) of Bima Account-II will break-even in nine years even with a guaranteed 6% per annum for a policyholder of age 45 going for insurance of 20 times annualized premium. What might save the day for Bima Accounts is a hefty bonus from LIC.

    At this time, LIC is not willing to comment on the bonus factor. The bonus will be given only if the policyholder pays the premium for the policy term even though the lock-in period is only three years. Remember that while the low returns are "guaranteed", the bonus is not.

    If you have to depend on a bonus to do better than only breaking even in nine years, you are taking an investment risk. The irony is that these plans are targeted for conservative investors. The Bima Account products are obviously timed to attract naïve customers during the tax-savings season-the very customers who are in a hurry to shove in up to Rs1 lakh in some financial instrument to get 80C tax savings. Thanks to LIC's mighty network, which gives it a presence in every corner of the country, it will rake in the money, but at what cost to customers?

    There are far better plans than the Bima Accounts. Like the traditional plan ICICI Prulife GSIP which gives real 5% guaranteed returns on your investment rather than the surreal 6% guaranteed returns from LIC's Bima Accounts. Moreover, GSIP will also give a bonus. A conservative investor looking for 80C savings would be better off putting money in PPF or opening a five-year tax-saver FD that offers interest up to 9.25% per annum. (IDBI Bank offers this rate today). As such, the funds in LIC's Bima Account cannot be withdrawn during the lock-in period of three years even if you discontinue premium payment. The insurance need can be taken care of by a term plan.

    It took the Insurance Regulatory and Development Authority (IRDA) a long time to ban the Universal Life Plan (ULP) that was rechristened as the Variable Insurance Plan (VIP). How did it clear this product and the advertisement? Will IRDA be caught napping this time too?

    The Bima Accounts offer you the flexibility of reducing the sum assured during the term of the contract, subject to a minimum limit. When the sum assured is reduced, such change will be effective from the policy anniversary following the date of request. The premiums can be paid regularly on a yearly, half-yearly, quarterly or monthly (through ECS mode only) basis over the term of the policy. The minimum premium is Rs600 per month through the ECS mode for Bima Account I, while it is Rs1,250 per month under Bima Account II. The minimum yearly premium for Bima Account I is Rs7,000 and Rs15,000 for Bima Account II. The policy term for Bima Account I ranges from five to seven years, while it ranges from 10 to 15 years for Bima Account II.

    There is an option to pay additional (top up) premiums without any increase in risk cover, to the extent of total basic premiums paid under the policy. A loan facility is also available immediately after the first policy anniversary.

    If premiums are not paid within the grace period, the policy will become a paid-up policy. The policyholder has the option to revive the paid-up policy within 12 months from the date of the first unpaid premium. During the revival period, the life cover will cease and no mortality charges shall be deducted. The balance in the policyholder's account during the period of revival will earn guaranteed interest rate of 5% per annum without debiting any expenses. On revival of the policy, the guaranteed rate of interest on the policyholder's account will again be 6% per annum from the date of revival.

    The sum assured under Bima Account I ranges from a minimum of 10 times the annualised premium to a maximum of 20 times of the annualised premium up to the age of 35 years, 14 times of the annualised premium for between 36 and 45 years of age and 10 times of the annualised premium for between 46 and 50 years of age.

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    COMMENTS

    Sumanta Das

    3 years ago

    I have purchased LIC BIMA ACCOUNT 1 ON AUG.2013 .On that time my Lic agent commited me 6% interest on that same plan. I have paid Rs. 1100.00 per month for it. And now a few days ago i came to know from other sources that there is huge deduction on my premium amount as higher as 27.5%on first year and i Lic will pay only the net balance amount on my account after deducting taxes and mortality charges.as a common man and i am really feeling insecure about my profit.can somebody give me the full picture about the maturity value of my lic policy.?? I also think that i was cheated by Lic agent on the time of purchase the policy

    JITESH

    9 years ago

    Guys.. Thts Correct.. I am planing to buy a plan which gives guarantee.. i am shocked to see that LIC is doing that kind of hiding the facts... further, Agent told me that LIC profits goes to Govt.. however, when i asked how , he did not give me satisfactory answer..
    When i chked with my family Chartered accountant he clarified that there is nothing like LIC is a Govt. Company .. however , its Promoted by Govt. in past. Even he told me that all the Insurance Companies are regulate by IRDA.. so it doesn't matter in which company u r investing.. Whether LIC or TATA or ICICI .. all are same for that matter.
    My suggestion: If you are buying a Insurance a Product.. Don't look at companies ..look and check product only... There are many more profitable Guaranteed products rather thn this LIC Mania... Best of Luck !

    ashish kumar

    10 years ago

    LIC is much better than ICICI

    KNSAKTHIVEL DO LIC CHENNAI

    10 years ago

    we cant accept the authors stream,pls understand BIMA ACCOUNT plans,6% guarenteed and also max 10% we expect in the circular.so dont worry abt this plan.LIC profits goes to only govt, govt welfare plans & policyholder not to owner.but ICICI PRUDENTIAL like pvt why come to insurance sector..they want earn money only for long term min return not for indans welfare or people welfare,anytime they can windup from india.....understand friends....knsakthivel,development officer,LIC OF INDIA,CHENGALPATTU BRANCH,CHENNAI CELL;099440 55277.

    REPLY

    Sumanta Das

    In Reply to KNSAKTHIVEL DO LIC CHENNAI 3 years ago

    HELLO MR. KNSAKTHIVEL CAN YOU PLEASE GIVE ILLUSTRATION OF MATURITY BENEFIT OF LIC BIMA ACCOUNT I. I HAVE ALREADY PURCHASED IT FOR 7 YEARS TERMS OF A PREMIUM OF RS. 1100.00. ALSO I THINK I AM GOING TO LOOSE MY MONEY BY INVESTING ON THE SAME POLICY. PLEASE HELP ME TO PROVE MYSELF WRONG!!

    R Patil

    10 years ago

    Rate of interest is 6% compounding.
    Charges are nominal for insurance. Please appreciate the transparency instead of paying for hidden costs and complaining afterwards.Bima Account gives you all that is ethical and all that is good- 6% compounding interest+insurance+additional interest+ no lapses+no charges for surrender+A request,Please study the plan well, it will grow on you when you realise the finer aspects.

    MIB

    10 years ago

    Dear Friends,
    Before commenting about an insurance product you should analyze the market. I've been working in this field for more than 3 years. Nobody is ready to take a pure term plan although it is available at cheaper rate. People wants minimum guaranteed returns from the premium he pays. That is the main reason for introducing these plans. No matter whether it goog or bed but it will be sold like a hot cake.

    Bhushan Antani

    10 years ago

    I presume that the views and said to be calculations are only and only for your own self only and not meant for the gineral public who is having trust / faith in functioning of LIC of india who runs the economy of India, who stables the stock market when it needs stability, who supports the infra projects of India and so on.
    Kindly keep in mind that everybody buys or invest money in any of the available instrument with a specific purpose and idea and hence nobody can generalise any thing with anything.
    Thanks for cleating awareness in public so as now people will ask us more questions before buying this product. Thanks once again.

    bhushan

    10 years ago

    Thanks to Money Life , i am saved. I had applied for this policy and my agent told me it was not an ulip , as i amavoiding them due to all the things associated with them .
    Then i am told my policy is rejected since it is available only for those people who don't have any other policy with LIC .

    REPLY

    Bhushan Antani

    In Reply to bhushan 10 years ago

    Dear Bhushan,
    It is defenitely not a ULIP. Your agent has not understood the policy as such. Secondly, there no such criteria that only who has or does not have can get this policy. Ant body can get. Do not depend only on agent and be wiser then your agent always to get best product at best price.

    Shreeniwas Gadiyar

    In Reply to bhushan 10 years ago

    The policy is available to all policyholders of LIC.

    Deepak R khemani

    In Reply to Shreeniwas Gadiyar 10 years ago

    This policy is available to anyone who wants to buy it. There is no question if you are an LIC policyholder or not,

    anil

    10 years ago

    lic ne public ko bevkoof banane ke liye ak aur plan launch kiya. ab 14 lack lic agent public ko bekoof banane nikal padenge. 7000 per year primium 5 year tak dene per . 35000 total ki maturity 37000 milegi. 2000 ka profit 5 years me.lic agent jindabaad.

    REPLY

    R Patil

    In Reply to anil 10 years ago

    You seem to have forgotten the insurance part. If the Life Assured dies at any time during the term, the nominee gets Sum Assured plus account value. You have also missed out on Additional interest. You have also not mentioned if any other insurance company offers better returns.

    vijay anthony

    In Reply to anil 10 years ago

    iam from rti u will have to prove your statment or meet you at high court.

    anil

    In Reply to vijay anthony 10 years ago

    mr. vijay i am very sorry for my comment, please forgive me, I am very very sorry.

    Vivek

    In Reply to vijay anthony 10 years ago

    helli rti activist vijay... i have line a lawyer in punjab& haryana highcourt who will fight moneylife case for free. I PROMISE YOU WILL BE MADE TO PAY A FIND OF AT LEAST Rs.50,000

    U FOOL first read RTI act
    .. High Court is not a forum for RTI Act...
    ...RTI act is not applicable to private cos.
    ...RTI act is not for finding ur paternal origins

    OM

    In Reply to vijay anthony 10 years ago

    if ur a RTI activist, go to small cities, towns & villages. LIC agents has missell in such a terrific way that u cant even imagine. MONEYPLUS which got thousands of crores from unaware, uneducated, rural based peoples by telling them that it is just like BANK FIX DEPOSIT. innocent people from rural areas invested in these ULIP bcoz they are told that these are guranteed return policies. people invested only bcoz of Goodwill of LIC Brand. even the BRANCH MANAGER, DOs, SOLD THESE ULIP AS A GURANTEED RETURN PRODUCT BY TELLING THAT IT WILL DOUDLE YOUR MONEY IN 3 YRS. brouchers, pamphelets r distributed giving rosy pictures that from 4th u wil not need to PAY premiums as it will automatically paid out of surplus after 3 yrs. premium paid.

    AS RTI ACTIVST U SHOULD MORE BOTHER ABOUT UNAWARE, INNOCENT POLICYHOLDERS MONEY, WHO DONT HAVE ANY RISK APPETITE FOR ULIPs.

    Jeevan Pendhari

    10 years ago

    I think any insurance plan should be compared by saperating Risk & Investment.

    First one should try to cover himself for unforseen Risk by calculating HLV. Thumb rule we follows is that 15 Times of Annual House Hold Expenses less your current liquid asset should be your risk cover. Now for general middle income person spending Rs.2,00,000/- p.a. will require 30,00,000 lacs insurance. No policy other than Pure Term Insurance can suffies this requirement. As all other policies will have annual premium at least equal to half of his expenses. HENCE THINK WISELY & COVER FIRST FOR RISK.

    Now about investment, why should I pay such heavy charges when I have other alternatives available at cheaper cost in the market?

    See you arived to an answer, where you must compare the cost paid for getting benefits.

    Jeevan Pendhari
    CERTIFIED FINANCIAL PLANNER(CM)

    Sanjita

    10 years ago

    Good Article for New Product of LIC.

    Raajeish S Agrawal

    10 years ago

    Dear Mr. Raj Pradhan,

    above as u suggested

    “There are far better plans than the Bima Accounts. Like the traditional plan ICICI Prulife GSIP which gives real 5% guaranteed returns on your investment rather than the surreal 6% guaranteed returns from LIC's Bima Accounts. Moreover, GSIP will also give a bonus.”

    I think u have not gown through the total calculation of GSIP.

    What I got after calculation of their illustration is:
    i) If person dies, nominee will get return of money at 5%. &
    ii) If person alive, he will get return of money at 4%.

    REPLY

    Dipankar kundu

    In Reply to Raajeish S Agrawal 10 years ago

    Is ICICI Pru is in a Position to Give 5% .But the Cos track record says that it is not in a position to pay because of High Claims Ratio & Bad position of the Books Of A/cs of India's Largest Pvt Sector Life Insurer.

    Vivek P

    In Reply to Dipankar kundu 10 years ago

    Can u know give high claim ratio in % rather than just stating bad?
    Regarding position to pay, IRDA annual report says ICICI Pru has more than required solvency ratio ( more than 150%) to pay its liabilities to pay.
    IRDA annual report says ICICI Pru made profits in 2010 so please prove how the books of a/c are bad? Are Policy Holder's A/c & Shareholder's A/c in bad status?

    Raj Pradhan

    In Reply to Raajeish S Agrawal 10 years ago

    http://www.iciciprulife.com/public/Broch...

    Read the brochure. Guranteed Death Benefit is 5% pa on all the premiums paid; Guaranteed Maturity Benefit is also 5% pa on all the premiums paid. The difference is maturity benefit will be given on policy maturity and death benefit given on death. There is no mention of 4% anywhere in brochure.

    R Patil

    In Reply to Raj Pradhan 10 years ago

    This article is biased. A good reporter will always give a substantial comparison of at least 2-3 companies. You,sir, have not done so. You have canvassed only one company. Very sad your Editors/Publishers should have checked the article or marked it as 'ADVT' on behalf of ICICI.

    lakhvir bansal

    10 years ago

    hello sir ur lic,mutual funds,banking and other financial product detail is exclent servics. so i give u MANY MANY THANK
    From :- DIL SE

    dnrao

    10 years ago

    The author who has written this article is short sighted person. Better he should check his eye sight with the doctor before analysing any OTHER product with LIC.

    REPLY

    VPS

    In Reply to dnrao 10 years ago

    DN rao -who has commented- is short sighted person. Better he should check his eye sight with the doctor before READING & WRITING anything on LIC

    santosh

    10 years ago

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