HDFC Sanchay Par Advantage Plan is a Non-Linked, Participating, Life Insurance Plan.
Non-Linked means the plan is not linked to the Equity or Stock Market. Any returns generated for this plan will not be influenced by Stock Market Movement.
Participating means the returns of the plan will be basis the bonuses declared by the Life Insurance company
We will be reviewing this plan purely from returns perspective. Click Here if you would like to have a look at all the HDFC Life Insurance Plans.
You can also read about the plan from HDFC’s Website by clicking here.
Before we Start…
Q, If you are asked to Invest 1 Lakh for 8 Years with an option to get Returns @ 8% which include –
- Getting returns of Rs. 42.6 Lakh through the years and
- Also receiving of Rs. 61.6 Lakh at Maturity
Meaning receiving a total of 1.04 Crores on the investment of only 8 Lakhs, what would your reaction be?
Q, If you are asked to Invest 1 Lakh for 8 Years with an option to get Returns @ 8% which include –
- Getting returns of Rs. 20.7 Lakh through the years and
- Also receiving of Rs. 1.67 Crores at Maturity
Meaning receiving a total of 1.88 Crores on the investment of only 8 Lakhs, what would your reaction be?
Something seems fishy, right?
Before you buy any insurance plan, make sure to be aware of 5 Common Mistakes to avoid while buying a Life Insurance policy.
Plan Options
HDFC Sanchay Par Advantage Plan has the following 2 Plan Options:
- Immediate Income – An option that provides regular income by way of cash bonuses (if declared), from 1st policy year and provides lump sum at maturity thereby creating a legacy for your loved one.
- Deferred Income – An option that provides Guaranteed Income for a guaranteed period, and also provides regular income by way of cash bonuses (if declared) throughout the policy term.
Immediate Income Option
An option to provide regular income by way of cash bonuses (if any declared), from 1st policy year. Further, it provides a lump sum at maturity.
FEATURES
Premium Payment Term (PPT) for 8 Years.
Cash bonus starting from 1 year after First premium
Sum Assured on Maturity is total Annualized Premium payable under the policy during the premium payment term.
MATURITY BENEFIT
Maturity Benefit = Sum Assured on Maturity
+ Accrued Cash Bonus (If not paid earlier)
+ Interim Survival Benefit (If any)
+ Terminal Bonus (If declared)
Sum Assured on Maturity is total Annualized Premium payable under the policy during the premium payment term.
Where, Interim Survival Benefit = Interim Cash Bonus Rate * Annualized Premium * Months elapsed since last
Survival Benefit payout date / 12
INTERIM SURVIVAL BENEFIT =
Interim Cash Bonus Rate x Annualized Premium x (Months elapsed since last Survival Benefit payout date / 12)
DEATH BENEFITS
On death of the life assured during the policy term, provided all due premiums are paid, death benefit equal to the following shall be payable as lump sum to the nominee:
• Sum Assured on Death plus
• Accrued Cash Bonuses, if not paid earlier plus
• Interim Survival Benefit (if any) plus
• Terminal Bonus (if declared)
The minimum Death Benefit shall be 105% of Total Premiums Paid4 as on date of death.
Where, the Sum Assured on Death is the absolute amount of benefit which is guaranteed to become payable on
death of the life assured. It shall be the highest of:
• 10 times the Annualized Premium
• Sum Assured on Maturity
• Death Multiple x Annualized Premium
Where, Interim Survival Benefit = Interim Cash Bonus Rate * Annualized Premium * Months elapsed since last
Survival Benefit payout date / 12
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Illustration
30 Years Old Male
Annualized Premium – 1 Lac
Premium Payment Term – 8 Years
Policy Term – 70 years
Sum Assured on Maturity – 8 Lakh
Returns
Now, let’s try to calculate the returns you can get under various options of HDFC Sanchay Par Advantage Plan
Proposed Returns –
@4% – 18.31 Lakh
@8% – 1.67 Crore
Real Returns –
1. For 8% Proposed results, lets see what we get as the Real Returns –
| Year | Premium Payment | Received (@8%) |
| 2020 | ₹ -1,00,000.00 | |
| 2021 | ₹ -1,00,000.00 | ₹ 30,000.00 |
| 2022 | ₹ -1,00,000.00 | ₹ 30,000.00 |
| 2023 | ₹ -1,00,000.00 | ₹ 30,000.00 |
| 2024 | ₹ -1,00,000.00 | ₹ 30,000.00 |
| 2025 | ₹ -1,00,000.00 | ₹ 30,000.00 |
| 2026 | ₹ -1,00,000.00 | ₹ 30,000.00 |
| 2027 | ₹ -1,00,000.00 | ₹ 30,000.00 |
| 2028 | ₹ 30,000.00 | |
| 2029 | ₹ 30,000.00 | |
| 2030 | ₹ 30,000.00 | |
| 2040 | ₹ 30,000.00 | |
| 2050 | ₹ 30,000.00 | |
| 2060 | ₹ 30,000.00 | |
| 2070 | ₹ 30,000.00 | |
| 2080 | ₹ 30,000.00 | |
| 2090 | ₹ 1,67,34,000.00 | |
| XIRR | 6.56% |
2. For 4% Proposed results, lets see what we get as the Real Returns –
| Year | Premium Payment | Received (@4%) |
| 2020 | ₹ -1,00,000.00 | |
| 2021 | ₹ -1,00,000.00 | ₹ 14,500.00 |
| 2022 | ₹ -1,00,000.00 | ₹ 14,500.00 |
| 2023 | ₹ -1,00,000.00 | ₹ 14,500.00 |
| 2024 | ₹ -1,00,000.00 | ₹ 14,500.00 |
| 2025 | ₹ -1,00,000.00 | ₹ 14,500.00 |
| 2026 | ₹ -1,00,000.00 | ₹ 14,500.00 |
| 2027 | ₹ -1,00,000.00 | ₹ 14,500.00 |
| 2028 | ₹ 14,500.00 | |
| 2029 | ₹ 14,500.00 | |
| 2030 | ₹ 14,500.00 | |
| 2040 | ₹ 14,500.00 | |
| 2050 | ₹ 14,500.00 | |
| 2060 | ₹ 14,500.00 | |
| 2070 | ₹ 14,500.00 | |
| 2080 | ₹ 14,500.00 | |
| 2090 | ₹ 18,31,000.00 | |
| XIRR | 2.72% |
This means that @8% proposed returns, actual returns are only 6.56% whereas for @4% proposed returns, actual returns are only 2.72%. Now, let us have a look at the second Income option.
Deferred Income Option
The Deferred Income option of HDFC Sanchay Par Advantage Plan claims to provide Guaranteed Income for a guarantee period. It also provides regular income by way of cash bonuses (if any declared) throughout the policy term. Finally, it provided a lump sum at maturity.
FEATURES
Premium Payment Term (PPT) for 8 Years.
Guaranteed income starting after 2 years till next 25 years along with non-guaranteed bonuses
Cash Bonuses (if any) thereafter till the end of Policy period.
Maturity amount at the end of Policy
SURVIVAL BENEFIT
Guaranteed Income:
This is expressed as Guaranteed Income Rate x Annualized Premium.
Guaranteed Income Rate:
This will depend on Age and Premium Payment Term. This guaranteed amount will be known to you at inception and would be payable for 25 years or Policy Term minus (Premium Payment Term + 1) years, whichever is lower, subject to your survival during this period.
The policyholder will start receiving Guaranteed Income plus discretionary Cash Bonuses (if declared) in arrears
one year after the end of Premium Payment Term.
Cash Bonus is expressed as Cash Bonus Rate x Annualized Premium
Guarantee Period:
Guarantee period is a period which is lower of [25 years, Policy Term less (Premium Payment Term + 1 year)]
starting after Premium Payment Term + 1 years. This is applicable only for Deferred Income Option.
MATURITY BENEFIT
The maturity benefit offered under HDFC Sanchay Par Advantage Plan will be the aggregate of:
- Sum Assured on Maturity plus
- Accrued Guaranteed Income and Cash Bonuses (if declared), if not paid earlier plus
- Interim Survival Benefit(if any) plus
- Terminal Bonus, if declared
Sum Assured on Maturity is total Annualized Premium payable under the policy during the premium payment term.
Where, Interim Survival Benefit = (Interim Cash Bonus Rate * Annualized Premium + Guaranteed Income) * Months
elapsed since last Survival Benefit payout date / 12
DEATH BENEFIT
On death of the life assured during the policy term, provided all due premiums are paid, death benefit equal to the following shall be payable as lump sum to the nominee:
• Sum Assured on Death plus
• Accrued Cash Bonuses and Guaranteed Income, if not paid earlier plus
• Interim Survival Benefit (if any) plus
• Terminal Bonus (if declared)
The minimum Death Benefit shall be 105% of Total Premiums Paid4 as on date of death.
Where, the Sum Assured on Death is the absolute amount of benefit which is guaranteed to become payable on
death of the life assured. It shall be the highest of:
• 10 times the Annualized Premium
• Sum Assured on Maturity
• Death Multiple x Annualized Premium
Illustration
30 Years Old Female
Annualized Premium – 1 Lac
Premium Payment Term – 8 Years
Policy Term – 70 years
Returns
Proposed Returns –
@4% – 23.22 Lakh
@8% – 61.60 Lakh
Real Returns –
1. For 8% Proposed results, lets see what we get as the Real Returns –
| Year | Premium Payment | Received (@8%) |
| 2020 | ₹ -1,00,000.00 | |
| 2021 | ₹ -1,00,000.00 | – |
| 2022 | ₹ -1,00,000.00 | – |
| 2023 | ₹ -1,00,000.00 | – |
| 2024 | ₹ -1,00,000.00 | – |
| 2025 | ₹ -1,00,000.00 | – |
| 2026 | ₹ -1,00,000.00 | – |
| 2027 | ₹ -1,00,000.00 | – |
| 2028 | – | |
| 2029 | – | |
| 2030 | ₹ 71,000.00 | |
| 2040 | ₹ 71,000.00 | |
| 2050 | ₹ 71,000.00 | |
| 2055 | ₹ 71,000.00 | |
| 2060 | ₹ 71,000.00 | |
| 2070 | ₹ 71,000.00 | |
| 2080 | ₹ 71,000.00 | |
| 2090 | ₹ 61,60,000.00 | |
| XIRR | 6.70% |
2. For 4% Proposed results, lets see what we get as the Real Returns –
| Year | Premium Payment | Received (@4%) |
| 2020 | ₹ -1,00,000.00 | |
| 2021 | ₹ -1,00,000.00 | – |
| 2022 | ₹ -1,00,000.00 | – |
| 2023 | ₹ -1,00,000.00 | – |
| 2024 | ₹ -1,00,000.00 | – |
| 2025 | ₹ -1,00,000.00 | – |
| 2026 | ₹ -1,00,000.00 | – |
| 2027 | ₹ -1,00,000.00 | – |
| 2028 | – | |
| 2029 | – | |
| 2030 | ₹ 29,500.00 | |
| 2040 | ₹ 29,500.00 | |
| 2050 | ₹ 29,500.00 | |
| 2055 | ₹ 2,500.00 | |
| 2060 | ₹ 2,500.00 | |
| 2070 | ₹ 2,500.00 | |
| 2080 | ₹ 2,500.00 | |
| 2090 | ₹ 23,22,000.00 | |
| XIRR | 2.94% |
This means that @8% proposed returns, actual returns are only 6.70% whereas for @4% proposed returns, actual returns are only 2.94%. So, basis the above, is this plan worth your money?
Summary
HDFC Sanchay Par Advantage Plan being a typical Endowment plan, the REAL RETURNS can only be determined when the value of bonuses will be known. The value of returns, from the look of it, seems to be somewhere between 2.94% and 6.70%. Don’t get misled by the 4% and 8% return values. How 4% and 8% values are calculated, I have created a separate post for the same.
Further, we have calculated the returns on Nett Premium amounts. We have ignored any GST component which is also charged on the premium. Taking the same into account, the returns will come further down.
Opinion
Consider Inflation. What will be the value of 71,000 or 2,500 that you will be receiving some decades later – that too annually? (Hint – Peanuts).
Investing money today purely basis that overall money will become crores from lakhs may not be a wise option. Ask any insurance or financial adviser, and every one will vouch for a Term Plan if you want to have appropriate cover for yourself. Also, people get stuck in paying heavy premium amounts and remain under insured. (Read – Why 60% people lose money in Life Insurance)
Consider alternate avenues of Investment for wealth creation and leave Insurance to what it should do – Insure You. What is a Mutual Fund? The very “very” basics.
YouTube Review
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HDFC Sanchay Cash Bonus Rates
The Cash bonus rates for HDFC Sanchay Par Advantage Plan for FY21 are noted below. Do not confuse the following % with the 4% and 8% noted in the sections above and in Product Illustration. The equivalent % for the bonus percentages will translated to a much lesser number. I will explain the same in a separate post.
