SBI Life ‘Smart Horizon’ ULIP charges are smart for the shorter horizon

The investment methodology is debatable; returns will be average due to shift from equity to debt 

SBI Life has introduced 'Smart Horizon' ULIP with stated objective of providing long-term capital appreciation. "The unique automatic asset allocation (AAA) feature makes Smart Horizon ideal for many evolving Indian investors who do not have the time to make fund allocation decisions on an on-going basis," said MN Rao, managing director, SBI Life.

AAA is an algorithm-based active investment allocation mechanism. This IT-based system, developed through testing over 5,000 potential scenarios in the Indian equity and bond markets, determines the optimal risk-return combination, the company explained in a statement.

The investment will be done in such a manner that initially there will be higher exposure to equities, followed by increasing exposure to debt and money markets as the plan nears maturity. AAA mechanism ensures better returns for investors, while protecting capital, the company said.

We have our reservations about the working of this methodology. The returns, too, will be average due to the shift from equity to debt.

The product also provides the customer flexibility to actively manage his investment. We found the premium allocation charge and policy administration charge to be the lowest among new ULIPs for the first five years and on the lower side for 10 years. The charges beyond 10 years are not on the lower side. The mortality charges for the product are much lesser than other ULIPs we came across. We hope that other insurers will take note.

Premium allocation charge: 2% of annualised premium in the first policy year only.

Policy administration charge: An initial policy administration charge equal to 0.70% of the annualised premium will be deducted at the inception of the policy. A monthly policy administration charge equal to 0.45% of the annualised premium will be deducted throughout the term of the policy.

Age at entry: Seven years to 60 years.

Age at maturity: (Maximum) 70 years.

Plan type: Regular premium.

Policy term: 10 years and any term between 15 years and 30 years, both inclusive.

Premium frequency: Yearly/half-yearly/quarterly/monthly.
Monthly frequency is available only through the electronic clearing system (ECS) or standing instructions (where payment is made either by direct debit of bank account or credit card).

Premium paying term: Same as policy term.

Premium range: Minimum - yearly Rs24,000, half-yearly Rs15,000, quarterly Rs8,000, monthly Rs3,000.
Maximum - yearly Rs74,000, half-yearly Rs37,000, quarterly Rs18,500, monthly Rs6,200.

Minimum sum assured: For age below 45 years - higher of [(10×AP) or (0.50×term×AP)]* and for age 45 and above - higher of [(7×AP) or (0.25×term×AP)]

Maximum sum assured : 20 × AP

(*AP stands for annualised premium)

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