Guarantees always attract. In a world where promises are rarely kept, guarantees are almost divine. Guarantees are a synonym for fixed. For those having the first-hand experience about volatile incomes or those who expect ups and downs in income in the foreseeable future, any whiff of guaranteed income is too good to resist.
This is the reason financial products always market the word ‘guarantee’. Some of you may have received emailers, SMSes or posts on social media about guaranteed returns. DHFL Pramerica Life Insurance Co. has its Magnum Assure product, an endowment insurance plan with guaranteed monthly payouts. Let us look at the details and find out the cost and charges for the guarantees.
DHFL Pramerica Magnum Assure is a non-participating endowment insurance plan with guaranteed monthly payouts. Anybody aged 18 years and a maximum of 55 years, can use the policy Terms available under DHFL Pramerica Magnum Assure of 10 Years & 15 Years. The minimum annual premium is Rs 48,000. So, the minimum sum assured is Rs 9.6 lakh.
The payout period means the period during which the applicable benefit under the policy would be payable. The payout period applicable for Policy Term 10 and 15 years is 120 months and 180 months respectively. In case of death of Life Insured, the Payout Period shall commence from the month of the death.
On survival till maturity date, the company will pay maturity benefit in the form of regular monthly payouts during the payout period. For instance, Rs 5,000 per month deposited for 15 years will lead to Rs 10,150 per month benefit upon maturity for the next 15 years. So, you are getting benefits worth over Rs 18 lakh for investing Rs 9 lakh.
On the unfortunate demise of the life insured during the policy term, the Company will pay Death Sum Assured in the form of equal monthly payouts during the Payout Period:
If the Life Insured dies while he/she is receiving the Maturity payouts, monthly Maturity benefit would continue for the remaining duration of the Payout Period and no additional Death Benefit would be paid.
Lumpsum or monthly payout
The Policyholder/Nominee/Legal Heirs, as applicable will have an option to take all due future Monthly payouts as a lump sum amount. Lump sum factors will vary with the outstanding number of monthly payouts
The loan facility will be available after the Policy acquires surrender value, up to 80% of the surrender value. The outstanding loan amount and unpaid interest on the loan amount shall be deducted from any amount payable under the Policy. The rate of interest applicable on the loan will be declared by the Company on an annual basis at the beginning of every financial year.
On surrender of the policy, Surrender Value equal to higher of Guaranteed Surrender Value (GSV) or Special Surrender Value (SSV) would be paid. The Special Surrender Value is not guaranteed and may change depending upon the then prevailing market conditions subject to prior approval from IRDA of India.
Tax benefits under section 10(10D) and section 80 C of Income Tax Act 1961 will be applicable as per prevailing tax laws. Tax laws are subject to change.
RupeeIQ take – The maturity benefit being paid by DHFL Pramerica Magnum Assure is almost equal to keeping the money in bank FDs. So, do you need a policy to give you bank FD like returns? The cost of the 15-year guarantee seems high. In exchange of bearing the interest rate risk, the policy does not give out any superlative return for getting back your hard-earned money. By merely paying bank FD like gain, the policy is clearly best suited for investors who don’t have good saving habits. If you can save regularly, opting for this policy is not a great decision.
Disclaimer: Please note that investors are requested to consult their financial, tax and other advisors before taking any investment decision.