PNB Metlife Guaranteed Savings Plan

Plan Type

PNB Metlife Guaranteed Savings Plan is a Non-Linked, Non-Participating, Savings, 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.
Non-Participating – means the returns of the plan will not be based on any bonuses declared by the Life Insurance company
Savings – means that this plan intends to give you certain return on the amount your are investing
Life Insurance Plan– gives Life Insurance cover.

Returns – Guaranteed
Risk profile – Low

We will be reviewing this plan purely from returns perspective. Click Here to see a comparison of all the Insurance Plans that PNB Metlife has on offer.

Plan Options

This plan offers 3 different Premium Payment terms to suit different needs.

1. 5 Pay – Premium Payment Term – In this plan, you need to make premium payments for 5 Years.
2. 7 Pay – Premium Payment Term – In this plan, you need to make premium payments for 7 Years.
3. 10 Pay – Premium Payment Term – In this plan, you need to make premium payments for 10 Years.

Maturity Benefit

The Guaranteed additions made under this plan are also based on a formula. The formula is as per below –
Guaranteed Additions = Guaranteed Addition rate X sum of all Premiums received till date

Let’s try to understand this with the help of an example,

For an Insurance policy with a Premium of ₹50,000, Basic Sum Assured is ₹5,00,000.
If one choses the Plan Option as 7 Pay Plan then
Maturity Amount = 100% of 5 Lakh + 7% of Cumulative Premium Payments

Therefore
Maturity Amount = ₹5,00,000 + ₹98,000 = ₹5,98,000/-

Death Benefit

Death Benefit is calculated as the sum of “Sum Assured on Death”
and Accrued Guaranteed additions

Where “Sum Assured on Death” is higher of
Basic Sum Assured or
(Annualized Premium) X (Multiple of Annual Premium (10x or 7x, depending on age at entry))
This death benefit shall not be less than 105% of the total premiums paid upto the date of death.

Returns – Illustration

Let’s try to understand the guaranteed returns that this plan has offer using some examples and also try to find out what it translates to in terms of absolute percentage returns.

We will use case of Radhey Shyam who is 35 Years old and has chosen the policy with different options.

10Pay – 20 (Payment Term – 10 Years, Policy Term 20 Years)

Policy Start Date	01-Jan-21
Name	Radhey Shyam
Age	35 Years
Premium Paying Term	10
Policy Term	20
Premium	₹            50,000
Basic Sum Assured	₹        5,50,000

When we put the values in a excel sheet and try to run the XIRR formula in it, we can see the returns percentage calculated as shown in the excel sheet below.

REAL Returns – 4.45%

10Pay – 20 (Payment Term – 10 Years, Policy Term 20 Years)

We will review the same plan as above but assume that the Insured person passes away in 7th Policy year

The Death Benefit in this case is a paltry 6.55Lakh which will be grossly insufficient for someone who can afford to pay the premium of Rs.50 Thousand each year.

Return Examples for 7Pay-15, 7Pay-12 and 5Pay-10 are at the end of this Blog.

Alternate Options

If you plan to use only a portion of money in a pure term plan, you can end up having more than 10 times the cover along with a much better return.

As an example, if you take insurance from LIC’s Jeevan Amar, the premium for 50Lakh cover is merely ₹5,940.
If out of the ₹50,000 Premium being paid, you chose to invest the rest of the amount in various asset classes, the speculative returns have been shown below. You can also chose any other Term plan but situation will remain the same.

Plan Specifications

Youtube Video Review

Miscellaneous

Surrender Value – MGSP – Guaranteed Surrender Value Factors_tcm47-71734.pdf
Lapse – If the premiums for the first two (for 5/7Pay) or first three (10 Pay) Policy Years are not paid in full, the Policy lapses at the end of the Grace Period and the risk cover, and Rider benefits, if any, will cease immediately.

Don’t worry if you missed the premium or planning to cancel the policy. Watch this video.

Loan Available – Yes. Read official Documentation for T&C.

Links to Material

PNB Metlife Website – Best Guaranteed Savings Plan: Savings Insurance Plans with Guaranteed Returns – PNB MetLife

BROCHURE
How Plan Works?

Summary

As expected the returns of the plan are low and the insurance cover is grossly inadequate. By taking tax exemptions, one can soften the blow of the overall low returns but the Insurance cover still remains the same and remember, this was supposed to be a “Life Insurance” policy and not an Investment plan. If you feel stuck in the plan and are looking for options, the video in this link can be seen. There are also number of fraudulent calls luring people into taking insurance policies which are not at all beneficial, so be careful.

Illustrations Contd.

7-Pay 15

Policy Start Date	01-Jan-21
Name	Radhey Shyam
Age	35 Years
Premium Paying Term	7
Policy Term	15
Premium	₹            50,000
Basic Sum Assured	₹        4,77,000

7-Pay 12

Policy Start Date	01-Jan-21
Name	Radhey Shyam
Age	35 Years
Premium Paying Term	7
Policy Term	15
Premium	₹            50,000
Basic Sum Assured	₹        4,77,000

5-Pay 10

Policy Start Date	01-Jan-21
Name	Radhey Shyam
Age	35 Years
Premium Paying Term	5
Policy Term	10
Premium	₹            50,000
Basic Sum Assured	₹        4,77,000