Can an Insurance plan give you 9.30% Guaranteed Returns along with an increasing insurance cover? Let’s find out…
Smart Wealth Plan offered by Max Life insurance company is a Non-Linked, Non-Participating Life Insurance Plan which offers Guaranteed Returns along with Life Cover – Single or Joint Life.
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.
Non-Participating means the returns of the plan will not be basis the bonuses declared by the Life Insurance company
This makes the Swart Wealth Plan a 100% Guaranteed Insurance Plan.
We will review this plan to understand the features and also to check the returns being given by this plan. You can also read about the plan from Max Life’s Website by clicking here.
Before we Start…
If you are asked to Invest 1 Lakh for 10 Years with minimum ₹11 Lakh Insurance cover and multiple options to get Guaranteed Returns, which Option will you choose –
Option 1 – After 12 Years get 14.1 Lakh as
- guaranteed returns of Rs. 11 Lakh with
- additional returns of Rs. 3.1 Lakh
Option 2 – After 15 Years get 17.84 Lakh as
- guaranteed returns of Rs. 14 Lakh with
- additional returns of Rs. 3.84 Lakh
Option 3 – After 20 Years get 26.9 Lakh as
- guaranteed returns of Rs. 20 Lakh with
- additional returns of Rs. 10.9 Lakh
Before you buy any insurance plan, make sure to be aware of 5 Common Mistakes to avoid while buying a Life Insurance policy.
About the Plan
| Plan Name | Max Life Smart Wealth Plan |
| UIN Number | 104N116V09 |
| Date of Review | 13 June 2023 |
Smart Wealth Plan comes in 2 different variants namely:
- Lumpsum
- Whole Life Income
We will cover the review of Lumpsum variant in this blog and the other variations will be covered in future blogs.
Premium Payment Term and Policy Term
This plan is available with different 4 different Premium Payment Term (PPT) with each PPT having 4 different Policy Terms.
Premium Payment Term is the duration for which the premium needs to be paid. Policy Term is the period of validity of policy.
These variations provides multiple opportunities of investments as per one’s goals and needs.
Eligibility Criteria
The age limit for the entry in this plan is between 91 days and 60 years.
The maximum age at which Max Life Smart Wealth Insurance Plan can be taken varies between 45 years to 55 years of age and depends upon the Policy Term.
The maturity age limit of this Insurance Plan also varies between the ages of 18 years to 80 years.
Premium
The Minimum Premium limit for the Lumpsum option is ₹1,000 monthly or ₹11,000 yearly.
Death Benefit
Death benefit under Max Life Smart Wealth Plan is higher of –
–> 11 times the sum of Annualised Premium + Underwriting Premiums (if any) OR
–> 105% of all sum of Total Premiums Paid, Underwriting Premiums + loading charge (if any) as –> on the date of death of Life Insured OR
–> Any absolute amount assured to be payable on death (explained later)
The absolute amount assured to be payable on death under = Total Premiums Paid accumulated Monthly at an interest rate of 8% p.a.
Maturity Benefit
Maturity Benefit of Smart Wealth Plan is equal to
–> Guaranteed Sum Assured on Maturity, plus
–> Accrued Guaranteed Additions (if any)
The guaranteed Sum Assured on Maturity depends on the Policy Term and is defined based on the following:
Guaranteed Additions
Guaranteed additions accrue at the end of the last 4 policy years, and is equal to:
Fixed % of Annualised Premium and depending upon the entry age, premium band and gender of the Life Insured and the sub-variant selected. Below mentioned Guaranteed Additions are applicable for male lives. (This may change)
For guaranteed additions to accrue, it is important that the Policy is either premium paying or fully paid-up. The Guaranteed additions will be payable only in the event of maturity or surrender of the Policy.
Surrender Value
Surrender Value is acquired after 2 Policy Premiums are Paid and varies based on the Policy term and the Premium Amount
Loan
Facility of Loan is available for this policy which is equivalent to 50% of Surrender Value.
Illustration
Let’s now understand Max Life Smart Wealth Plan with help of a 2 examples:
Example 1
Installment Premium with first year GST = ₹1,04,500
Installment Premium with GST 2nd year onwards = ₹1,02,250
Maturity Benefit = Guaranteed Sum Assured + Accrued Guaranteed Additions (if any)
Now, Guaranteed Sum Assured is
= 110% x Annualised Premium (exluding GST) x Premium Payment Term
= 110% x ₹1,00,000 x 10
= ₹11,00,000
And Accrued Guaranteed Additions is
= 4 x 77.69% x ₹1,00,000
= ₹3,10,760
Maturity Benefit =₹11,00,000 + ₹3,10,760 = ₹14,10,760 (Guaranteed and Tax Free)
Death Benefit for first 7 years is
= 11 x Annualised Premium
= 11 x ₹1,00,000
= ₹11,00,000
After 7 Policy Years, the Death Benefit starts increasing based on Total Premiums Paid accumulated Monthly at an interest rate of 8% p.a.
Example 2
Installment Premium with first year GST = ₹1,04,500
Installment Premium with GST 2nd year onwards = ₹1,02,250
Maturity Benefit = Guaranteed Sum Assured + Accrued Guaranteed Additions (if any)
Now, Guaranteed Sum Assured is
= 160% x Annualised Premium (exluding GST) x Premium Payment Term
= 160% x ₹1,00,000 x 10
= ₹16,00,000
And Accrued Guaranteed Additions is
= 4 x 272% x ₹1,00,000
= ₹10,88,000
Maturity Benefit =₹16,00,000 + ₹10,88,000 = ₹26,88,000 (Guaranteed and Tax Free)
Death Benefit
Returns
Returns of Example 1
Now, let’s try to calculate the returns you can get under the above 2 options of Max Life Smart Wealth Plan
Maturity Returns in Example 1 is ₹14,10,760
Real Returns –
If you opt for the Old Income Tax regime, come under 30% tax benefit and can avail tax benefits under Section 80C, then you can get Guaranteed Tax Free returns of 9.21%. Check the table below for details.
However, if you are not investing purely from returns perspective along with benefit of insurance, your real returns will be 4.25%.
Returns of Example 2
Now, let’s try to calculate the returns you can get under the 2nd option of Max Life Smart Wealth Plan
As your would recall, the Maturity Returns in Example 2 were ₹26,88,000
Real Returns –
If you opt for the Old Income Tax regime, come under 30% tax benefit and can avail tax benefits under Section 80C, then you can get Guaranteed Tax Free returns of 8.80%. Check the table below for details.
However, if you are not investing purely from returns perspective along with benefit of insurance, your real returns will be 6.31%.
Summary
With the Increase in interest rates, the rate of returns of guaranteed insurance plans have also increased. While one should not ideally mix Insurance and Investment but for people choosing traditional method of investments, some of these plans may offer good balance between the Insurance Coverage and rate of returns.
Before you choose an Insurance plan, try to go through the complete plan details from official brochure and also always request for an illustration from your Insurance agent.
If you are interested in knowing more about this plan or have any questions, Messsage via Whatsapp to +91 999109 29066 with your name and age.