IDBI Federal Wealthsurance Dreambuilder ULIP has many good features with appreciable flexibility, although high mortality charges is a drawback

IDBI Federal Wealthsurance Dreambuilder is a regular premium ULIP that offers a range of fund options, with flexibility and benefits bundled together, at charges that are largely in line with the trend for ULIPs in the market.

Dreambuilder gives freedom to pick the premium in the range of Rs25,000 to Rs1 lakh;  a choice of 13 fund investment options; the sum assured with no limit (subject to underwriting); and from riders covering 17 major diseases.

The scheme also offers hospital cash benefit, cover for disability and accidental injuries, and a policy term that can extend from 10 years up to the age of 75 years where the minimum premium payment term is five years.

The flexibility on premium, optional riders and choice of duration are the selling features.

IDBI has a premium allocation charge of 3.15% of the annual premium for Dreambuilder in the first year, but there is no charge from the second year onwards. The policy administration charge is 6.30% for the first five years and 3.15% from the sixth year onwards, till the end of the policy term.

The charges are in line with other ULIPs in the market, but the rates are on the higher side over a period of five years or more. For a long-term investor, paying 3.15% till the end of the policy term is high, considering that some ULIPs prior to the regulatory changes (effective 1 September 2010), had total charges of 1% after the lock-in period.

The mortality charges on Wealthsurance Dreambuilder are certainly on the higher side and this is a drawback. While LIC's standard mortality rate, used as a benchmark by the insurance industry, has a mortality factor of 1.42 for investments at the age of 25, IDBI has decided on a factor of 1.87 at age 25 for Dreambuilder. Insurers are permitted to charge according to their experience in the life insurance business, and Aegon Religare has a mortality factor of 1.083 for age 25.

The Wealthsurance Dreambuilder insurance plan boosts your funds through guaranteed loyalty additions at the end of the 10th policy year and every five years thereafter, as a reward for long-term investments.

Guaranteed loyalty additions will be made as a percentage of the average fund value (corresponding to regular premiums) in the 36 months preceding the loyalty unit allocation date.

The flexibility that IDBI affords, allows an individual to invest according to his/her individual risk-return profile. There is a choice of assured returns, variable returns linked to market performance, and returns linked to the market, but with protection of capital. The market-linked product has self-managed and expert-managed options. There are no charges for switches.
The plan has optional insurance benefits, like comprehensive health and accident cover. It also has major diseases and serious illness benefits, with payment of lump-sum cash, as well as hospital cash benefit through a daily cash allowance. The accident benefit has an accidental death and disablement benefit.

On the unfortunate demise of the person (whose life is insured), prior to maturity, the insurer shall pay the nominee the basic sum assured, or the fund value as of the date of intimation of death. The death benefit will be at least 105% of the total premiums paid.